The main risk is the loss of the collateral, for example, an apartment or a car
In the first quarter, banks issued loans secured by property of citizens by almost 30% more than in October-December 2023. This was reported by the United Credit Bureau (UCB). Loans secured by property — most often a car or real estate — are issued by banks more willingly and on more favorable terms than unsecured loans. MK found out from experts what are the benefits and risks for Russians in secured lending.
Russians have become more active in taking out loans secured by property. According to OKB, from January to March, more than 53 thousand such loans were issued for a total amount of 63.32 billion rubles. This is an 18% increase in the number of issuances compared to the last three months of 2023. In terms of volume, the growth was even more noticeable: +28% quarter-on-quarter.
The most popular types of collateral are apartments and cars. Russians most often borrow about 1 million rubles from a bank using a car as collateral, and an average of 2.8 million rubles as collateral for real estate. “The trend in the development of secured lending to private clients has been noticeable since 2023, when their share in relation to unsecured loans increased from 5% to almost 10%,” Aleksey Volkov, marketing director of the National Bureau of Credit Histories, confirmed the observation. He identified two main reasons for this phenomenon. Firstly, tightening regulation, that is, the requirements of the Central Bank of the Russian Federation for its wards for issuing unsecured loans. Secondly, the desire of borrowers and banks themselves to reduce the cost of lending against the backdrop of rising rates. For comparison, the average rate on secured loans in March was 18.34%, and on unsecured loans it was 27.2% — a significant difference.
As Freedom Finance Global leading analyst Natalya Milchakova noted, it is difficult to speak unequivocally about the impact of this particular trend on macroeconomic trends. The debt burden of citizens, if the population pays 35-40% of their income to service debt, is an unfavorable factor for the economy, and if at the same time there is also a high proportion of Russians whose property is pledged, then the situation for borrowers looks even more alarming. Indeed, in the event of massive loan defaults, the number of personal bankruptcies will also increase, as well as the standard of living of citizens will decrease, since banks will deprive them of their last property.
At the same time, many individual borrowers see more advantages than disadvantages in obtaining a loan secured by property. For example, because banks are more willing to approve loans secured by property than unsecured loans, they sometimes approve even borrowers with a bad credit history. Loans secured by property are often taken out to start your own business. For many citizens, this is a better option to get initial capital than simply selling real estate, which, as a rule, cannot be sold quickly, Milchakova argues. People consciously take risks. If it is justified and everything worked out, then after the loan is repaid, the property will return to its owners, if not, then they will have problems up to and including personal bankruptcy. In general, the growth in secured lending suggests that over time the boom in unsecured loans will end, and getting a loan without collateral will become problematic for most potential borrowers, the analyst warned.
The main risk for Russians taking out collateralized loans is that they will lose the collateral if the loan is not repaid. “It should be taken into account that when selling the collateral, a loss in price is inevitable, that is, financial losses will be even greater than in the case of non-payment of an unsecured loan for the same amount,” Volkov noted.
There are also smaller risks. According to Vladimir Kuznetsov, vice-president of the Association of Lawyers for Registration, Liquidation, Bankruptcy and Legal Representation, the bank may have claims against the client if prohibitions regarding collateral are violated, for example, when renting out an apartment registered as collateral.
As Dmitry Yanin, Chairman of the Board of the International Confederation of Consumer Societies (ConfOP), recalled, rates on secured loans are not low enough, and the level of non-repayments on them can reach 30%. Accordingly, in the future, people will face prosecution from banks. At the same time, the expert believes that credit institutions will not actively seize collateral, with the exception of cars, but this should also be remembered.