Consumer Debt Spikes In Russia As Income Falls

As Russian citizens continue to experience a decrease in disposable income, consumer lending with high interest rates has increased dramatically.

Disposable income for Russians has declined steadily since 2013 through 2018. Personal consumer lending has increased to $130 billion last year. This is a sharp 46% increase from 2017. Unsecured cash loans account for most consumer debt.

Interest rates are unforgiving, ranging from 12% to 19%. There have been a surge of commercial and nonprofit lending institutions separate from banks that charge interest rates that surpass 500%. According to Russian President Vladimir Putin, current lending practices are resulting in individuals using 40% of their wages to repay debt.

“Our estimate is that 2021 is the year when [the consumer-lending problem] will blow up,” said Maxim Oreshkin, Russia’s economy minister.

The average amount of debt is close to $4,600, according to the United Credit Bureau. This is small relative to the average $38,000 in debt that an American holds. However, the average monthly Russian salary is $670. Near to 44% of Russian households are in debt. This is a 10% increase from 2 years ago. 1 in 8 Russians spend more than 50% of their income on loan payments.

As interest rates increase along with increased borrowing, Russians are unable to escape the consumer debt that is burdening the entire country.

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