Unstoppable Consumer Credit in Costa Rica

In 2010 average household debt per household was around $3,000, and last year, just six years later, the figure exceeded $6,500.

Monday, September 11, 2017

Data compiled by Nacion.com shows that the average debt of each Costa Rican household indicated in the analysis only takes into account financing with supervised entities, meaning that it could be be omitting loans taken out for consumption through other sources of unregulated financing, such as pay day lenders and pawn shops, among others.

"... Consumer credit accounts for almost a third of the loans granted by the financial system, but there are nuances depending on each type of entity. In the case of cooperatives, the Sugef and the rating company Fitch Ratings have drawn attention to the high concentration they have in these types of loans."

"... In the view of analyst Andres Volio, who has warned about the problem, the economic situation in the last few years facilitated families borrowing for consumption. "A relatively large period of macroeconomic stability, with low interest rates and a near-fixed exchange rate, has facilitated growth of indebtedness and may have made it difficult to feel the risks of borrowing, especially the risks of a significant increase in the costs of paying for a loan, whether due to variations in interest rates or the exchange rate."

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More on this topic

Costa Rica: Limitations on Bank Loans

April 2017

By requiring banks to have additional capital requirements the Sugef aims to discourage consumer loans, mortgages and vehicles loans with long repayment terms.

Arguing that terms of over 30 years for housing loans and more than 5 in consumer loans encourages overindebtedness of Costa Ricans, the Superintendent of Financial Institutions (SUGEF) has presented a proposal to reform the rules on capital adequacy of financial entities, in order to require entities that carry out these credit operations to have additional capital.

Panama: Cost of Borrowing Is Cheap

June 2015

Competition to attract customers into the banking sector in Panama and low interest rates account for the 12% growth in consumer credit between March 2014 and March 2015.

Between March 2014 and March 2015 the balance of the portfolio of consumer credit from Panamanian banks recorded an increase of 12.26%, exceeding $8 billion.

Panama: Report on Credit Cards and Interest Rates

March 2015

An analysis of costs, interest rates and annuities on credit cards and other financing cards issued in Panama to February 2015.

The study by the Authority for Consumer Protection and Antitrust indicates that the average interest rates for credit cards and other financing ranges from 7.5% in the case of Visa Platinum card Coop.

Mortgage Interest Rates in Costa Rica Touch Floor

July 2013

From the 14% recorded last September, interest rates for housing loans in colones are down to 10%, a figure at which the indicator seems to have settled.

Several factors have influenced this behavior:
There have been no significant changes in the passive base rate, which many home loans are linked to.

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