Recent news related to finance and economics often contain headlines on Finns taking more loans. Private debt has been increasing steadily. This development, which has been more prominent in recent years has multiple causes.

Understanding economics is not always easy unless one has studied the topic and is familiar with the plethora of terms and jargon. So here are some basics on the topic of private debt.

What is private debt?

Researching the topic online may bring back many results with complex explanations, but simply put, private debt means the debt that a private person owes to a bank or other lender or creditor.

A common example of private debt could be a loan private persons would have applied for to purchase their first apartment, a long term dream for many. Another example is when a person needs getting some help for the current situation of less or no income and higher expenses. A great example of the latter one is debt caused by student loans.


Increase in debt taking

One reason for this increase is that more and more Finns are taking loans for new houses and apartments. The last couple of unsteady years has affected Finns’ jobs, and many have needed to rethink their plans. Also, younger people have become interested in investing and some students take out their student loans for investment purposes in the hopes of making some extra profit.

The Band of Finland recently suggested that a debt ceiling should be implemented to prevent private people from taking too many loans, which could threaten the collapse of the economy in case interest rates increase or borrowers would be unable to pay back due to lack of income. Covid pandemic as an example has caused loss of income for many people in the service industry.

The bank suggests a debt limit of 500%, which is five times the yearly gross income for private persons or families. This, real estate agents fear would damp down the housing market and especially affect first time home buyers.

Planning for a loan

If you are planning to apply for a loan, you should still remember that it does create debt for you to pay back. That is why planning your loans is very important. 

Contact professionals

Most Finns and immigrants living in Finland have at least some private debt during their lifetime. It is very common to apply for a loan, and clearly, it’s becoming even more typical. Nowadays applying for a loan is much easier, because of all the help anyone can get online.

Additionally, banks and other lenders have hired professionals, who can help you when you are starting to apply for a loan. Since private debt is connected to your finances, you should always take advantage of all the help, so you can apply for a loan in the best way possible.