New study provides insights into the lives and concerns of German debtors

Debt in Germany: What makes consumers tick in the context of financial challenges?

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People don't talk about money - and apparently even less about debt. Although debt is a mass phenomenon, surprisingly little is known about the people affected and the effects on their health. The digital financial coach Fabit and the debt collection company coeo took on the topic and asked debtors living in Germany about their living conditions, their debt situation and also how the stressful situation affects their health.

Debts have long since arrived in the middle of society, as at least one in five Germans has them. 6.16 million people1 are considered over-indebted in Germany, 12.4 million Germans2 had to pay off at least one instalment loan at the end of 2020. How many citizens also have arrears with traders, family and friends is not known. "Data on debts and debtors is difficult to obtain," Sebastian Ludwig, CEO DACH of the coeo Group, also knows. "They are often only collected when people slip into over-indebtedness or have been in this situation for years. We know people from personal conversations in our contact centres. With our joint study, we have tried to create more transparency and thus a better overall picture." 

Who Is "The Debtor"?
One thing right away: There is no such thing as ONE debtor. Although by far more men in Germany are considered over-indebted (over-indebtedness rate men: 11.7 %, women: 6.75 %)3 and also apply for private insolvency more often (men: 60.1 %, women: 39.9 %)4 , debts as such seem to be a female phenomenon in the majority of cases: almost six out of ten people surveyed (57.7 percent) are women. The results are also surprising when it comes to age: More than a third of the respondents (34.6 %) are younger than 29, making up the largest group of debtors. The average age, on the other hand, is 35.6 years. The majority (40.9 %) say they are single. A quarter each live in a relationship (24.2%) or are married (24.5%). Slightly more than half of the respondents (55.8%) are parents.

The main reason for over-indebtedness among young people is mostly uneconomical household management5 , i.e. repeated excessive and superfluous consumption that exceeds one's own economic circumstances. But a lack of financial knowledge also plays its part.6 This includes, for example, that many young people do not know how to deal with instalment purchases and loans or which insurances are actually necessary.

Higher debts with rising income
Almost half of the debtors surveyed (48.2%) have a regular job. Only one in ten (11.8%) was studying or undergoing training at the time of the survey. 19.3 % were looking for work. Young people in financial difficulty are still at the beginning of their careers, which in turn could explain low income. "However, net income says nothing about how likely it is that someone will become a debtor," says Dr Ralf-Michael Schmidt, founder of Fabit, classifying the results. Rather, the data show that the amount of debt tends to increase with rising income.

The average monthly net income of debtors is 1,561 euros.
The average amount of debt is 11,794.77 euros. The group of people with debts between 1,001 and 5,000 euros is the most heavily represented.

Money worries lead to isolation and make people ill
Financial stress, money worries and debts burden those affected and affect all areas of life. The stress has a destructive impact on relationships with friends, colleagues and within the family. When there is no money left at the end of the month and financial problems also weigh on the situation, many of those affected are overcome by a feeling of powerlessness. A large proportion of debtors (73.5 %) say they feel paralysed just thinking about their finances; almost eight out of ten of those surveyed feel massively restricted in their everyday lives and forgo purchases and activities. In addition, there is the worry that they will no longer be able to afford essential expenses such as food (41 %). The continuing price increases for food and energy in recent months have probably led to even more people sharing these fears.

Debts and money problems do not only burden those affected in their everyday social life. "Shame, fear and anger are just some of the feelings that debtors experience when they think about their financial situation," Schmidt summarises the results. "But inertia, sadness and the absence of confidence also inevitably lead to a state of mental and emotional exhaustion." Six out of ten of those surveyed (58.9%) said they also suffered psychologically from their situation. Depression, anxiety and burn-out are not uncommon. 60.9 % also report physical problems such as loss of appetite, pain and sleeping problems. Illness, addiction and accidents are among the main triggers of debt and over-indebtedness. However, many people do not realise that debt can also make people ill.7 This makes it all the more important to help people get out of their financial dilemma.

The biggest impact of the financial situation on debtors is the restriction of purchases and activities. In addition, the financial situation has a strong impact on the willingness to communicate (inhibitions to open letters and to respond to letters) and on health (physical and psychological effects).

Bad relationship with money in the cradle?
Debts also influence personal attitudes towards money and financial issues. The results of the study "Debt in Germany: What makes consumers tick in the context of financial challenges?" show that negative associations with these topics strongly predominate among debtors. Although almost all respondents (85.8%) agree with the statement that money can give you a good life, they also say to a similar extent (82.9%) that they are constantly worried about money. Only a quarter (25.2%) are not uncomfortable talking openly about the topic. If such an attitude becomes a belief, it is difficult to develop a positive relationship with money, financial planning and provision. Financial behaviour is primarily learned in the parental home. If children observe this in the family, the probability of adopting it later is high.

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About the study
The data used is based on an online survey conducted by the Berlin Institute for Innovation Research GmbH (BIFI) on behalf of Fabit GmbH and the coeo Group. 364 debtors participated in the survey between 07.02.2022 and 22.02.2022. Only those persons who had debts in the survey period and had received reminders, collection letters, payment demands and/or foreclosures in the last six months were admitted to the study.

Other sources used
1, 3 Debtor Atlas 2021, Creditreform Boniversum, Debtor Atlas Downloads | Boniversum
2 Risk and Credit Compass 2021, SCHUFA, Risk and Credit Compass 2021 | SCHUFA
4, 5, 6, 7 Statistics on over-indebtedness of private individuals 2020, DESTATIS Federal Statistical Office, Statistics on over-indebtedness of private individuals - Fachserie 15 Reihe 5 - 2020 |

About Fabit
Fabit is an app for optimising financial habits. It is aimed at people who want to manage their finances better in order to lead a financially healthy and relaxed life in the long term. "Fabit" is derived from the English word "financial habit". Fabit GmbH, the company behind Fabit, was founded in 2021 by Dr. Ralf-Michael Schmidt, Robert Heim and Susanne Krehl in Berlin.

About coeo
coeo was founded in 2010. In the meantime, the coeo Group is one of Europe's most successful technology-driven service providers in receivables management. The group of companies has locations in Germany, the Netherlands, Belgium, Great Britain, Austria and Switzerland. The more than 500 employees of coeo process around 4.2 million debt collection files annually.

Press contacts
Fabit: Julia Ptock | Phone: +49 (0) 176 637 419 85 |
coeo Group: Sarah Lehmann | Phone: +49 21 33 24 63 - 30 |