High inflation causes financial problems for more and more citizens, and excessive debt burdens are often the result. Last year there were more than 21,000 first contacts with debt assistance, more than in twelve years. High collection costs and interest cause the amounts to explode over time. But there are also profiteers.
Debt advice centers are concerned about the fact that 17 percent more people have found a job for the first time than in the previous year. On average, people who rely on debt assistance have an excessive debt burden of 55,000 euros. The most common reason is job loss or reduced income (e.g. due to maternity leave or retirement). The second most common problem is good money management. About 18 percent have taken on financial responsibility independently. “It is alarming to us that one in eight people already cite the high cost of living and housing as a reason for over-indebtedness,” said Clemens Mitterlehner, head of debt advice. The value is twice as high as last year.
More and more young people are affected
Other commonly cited reasons that get people into money trouble include divorce, personal fortunes or guarantees. Women usually take on such guarantees or joint liability, for example in smaller companies. In principle, men fall into the debt trap much more often; almost 60 percent are men. Young people are also increasingly affected by excessive debt; about a quarter are younger than 30 years old. There is often a lack of financial education across all age groups. Many are then suddenly surprised by the mountain of debt.
Ultimately, it is often a personal bankruptcy. “In 2023 there was an increase of 8 percent,” said Mitterlehner. The fact that unemployment is currently rising is also visible in the advice centres. “We know from our experience that things run quite parallel with some delay,” says Mitterlehner. If your income suddenly drops drastically, it is no longer so easy to finance your usual expenses. Mitterlehner therefore warns against cuts to the unemployed, as this would worsen the situation.
‘Debt collection agencies earn stupid and stupid money’
Once unemployment or failed self-employment has fueled excessive debt, those affected often find themselves in a dangerous “vortex.” According to debt advice providers, debts triple approximately every eight years if repayments are not made. Mitterlehner demands that the maximum possible doubling is due to the follow-up costs.
In addition to interest and compound interest, collection costs and fees are also significant. Minister of Social Affairs Rauch criticizes common practices here: “Debt collection agencies earn stupid and stupid money from people with too much debt. We have included an upper limit for collection costs in the government program, but negotiations are difficult.”
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
