Rising Personal Debt in Argentina: A Snapshot Through July
Data available up to July reveals a significant increase in personal debt taken on by Argentinians through credit cards and personal loans. A total of $11 billion has been financed through these methods. Over the past year, demand for this type of financing has surged, with personal loans growing by 144% in real terms and credit card usage increasing by 53%.
The average debt per person reached $5.6 million in July, a 75% increase compared to the $3.2 million average debt held by clients a year prior.
This rise in debt is accompanied by growing concerns about repayment. Overall credit irregularity (default) – considering both customary banks and non-banking entities – stands at 8.6%, more than double the rate recorded in january. However, the default rate jumps to 15% when solely considering liabilities held with non-banking entities.
The Central bank (BCRA) attributes the lower default rates within traditional banks to more effective collection methods, such as direct debit from savings accounts, and possibly lower interest rates incentivizing timely repayment.
Non-bank lenders are experiencing more critical payment arrears. personal loans from fintech companies, installment financiers, large retail chains, and cooperatives have a 20% late payment level. Loans specifically for household appliances show the highest rate of delinquency at 27%, while virtual wallets report a default rate of 18%.
The BCRA defines an amount as in arrears after 90 days past the due date. However, the report also notes a concerning trend of debt at risk – amounts not yet 90 days overdue, but showing signs of potential future default, suggesting a possible further deterioration in credit quality.
Adding to the issue, interest rates on these loans are substantially higher than the country’s inflation rate. In July, while annual inflation reached 23%, non-banking personal loans carried a nominal annual rate of 129%, and credit card interest rates were at 92% – four times the general pace of price increases.These high rates were implemented during a period of monetary tightening aimed at stabilizing the exchange rate in the pre-election period.
following the elections, the BCRA has begun to gradually ease restrictions on banks, including making reserve requirements more flexible, with the goal of increasing money circulation and encouraging lending.
