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Are all consumer loans bad or dangerous?

No! To the contrary: In many cases, it can be very useful for consumers to take out a loan. This is particularly true for larger expenditures that pay off over the lifetime of the product (e.g. the purchase of an energy-efficient washing machine or the insulation of the house facade). At times, it can also be practical for consumers to use credit for smaller expenditures.

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But: Whether credit is useful or dangerous always depends on the individual circumstances. In particular, the risk does not depend on the amount of credit. When a top earner borrows 50,000 euros for the new SUV, this can be less risky than the 200 euro credit taken out by a student for a new winter jacket (this question is exactly what creditworthiness assessments are about). The rule of thumb is: Credit that I cannot afford will not solve any problems – it will only create new and even bigger problems.

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When one is already facing financial difficulties, even “small loans” can lead to overindebtedness. This is also why e.g. the popular “buy now pay later” (BNPL) offers are anything but innocent, despite the industry insisting on the opposite. Through BNPL, consumers often get easy credit when shopping online in order to pay for their purchases only at a later point in time. The problem with that is: Currently, these loans are often granted without any proper controls. If you do not pay back in time, you quickly find yourself confronted with high penalty fees and debt collection offices. This has nothing to do with responsible lending. For this reason, I will try to make sure that the rules of the Consumer Credit Directive also apply in full to such small, short-dated or interest-free loans.