Czech citizens are encountering more difficulty in repaying their debts, marking the first year-on-year increase in the overall volume of unpaid debt in a decade. According to the CRIF – Czech Credit Bureau, the amount of debt not being compensated has slowly but steadily risen this year, with Czechs behind on payments by 28.2 billion crowns. This increase is primarily attributed to consumer loans.

Jiří Rajl, CEO of the Non-Banking Client Information Register, highlights that this upward trend in unpaid debt should serve as a warning signal. At the end of the first quarter, citizens’ debt reached 3.18 trillion crowns, with the majority comprising long-term mortgage liabilities. However, it is the increasing volume of short-term loans that pose a greater risk.

More than 170,000 individuals are currently behind on such payments, with an average debt of over 134,000 crowns per person. Experts advise immediate communication with loan providers when payment problems arise. Reputable companies often offer options for refinancing and establishing new repayment schedules. Failing to address these issues promptly can lead to a debt spiral, where individuals take on new, riskier obligations, resulting in more challenging conditions and penalties.

The age group most affected by the rapid increase in the volume of debt at risk of non-payment is individuals aged 30 to 34, experiencing a rise of over ten percent. However, the volume of debt has increased across all age groups except the oldest, over 55.

Radek Hábl from the Institute of Prevention and Debt Resolution explains that short-term loans are often used to manage high energy arrears, buying individuals some time to avoid immediate disconnection. The recent increase is also linked to utility and energy bills from the previous year, particularly affecting homeowner associations.

The rising costs of food and transportation are also contributing factors to the increasing debt burden. Many households are facing budget pressures, despite the housing subsidy provided by the state. Daniel Šmejkal from the Debt Counseling Center notes that clients with lower wages are particularly impacted.

With the real incomes of Czechs falling for the second year due to high inflation, households are allocating a larger portion of their earnings to housing and food expenses. Research conducted by PAQ Research for Czech Radio reveals that the proportion of income spent on housing has increased from 23 percent to 31 percent, while overall spending, including food purchases, has risen from 43 percent to 49 percent.

To address repayment difficulties, experts recommend promptly contacting loan providers and considering debt consolidation for those with multiple loans. Taking proactive measures is crucial, as ignoring repayment issues will only lead to the growth of debt over time. Collaboration with non-profit organizations and seeking professional advice are additional options available to debtors.

In this challenging financial climate, individuals are advised to carefully assess their loan needs and explore alternative solutions before committing to further debts.

Article by Prague Forum