According to the Index of Prosperity and Financial Health, compiled by analysts from Česká spořitelna, the Europe in Data portal and the Institute of Sociology of the Czech Academy of Sciences, almost half of people of working age in the Czech Republic are currently paying off mortgages, consumer loans or loans obtained from relatives or non-banking institutions.
According to a survey of 1,520 respondents conducted in March, 52% of Czechs have no loans, mortgages or arrears, while 48% do. Of these, mortgages are the most common, with 38% of respondents having one, followed by consumer loans from banks, used by 37% of respondents. Far fewer people use non-bank loans, leasing or loans from building savings instead.
Most often, Czechs do not invest more than one fifth of their monthly income to repay debts. However, in 5.4 % of cases, spending on repayments exceeds half of the monthly income. Among these people, most have difficulty making ends meet. This is especially true for those who also take out loans to cover everyday expenses, as these people are more likely to spend more than half of their income on repaying debts.
In this regard, Lukáš Kulhavý, head of unsecured loans at Česká spořitelna, said that people should carefully assess their monthly budget before applying for a loan. Monthly repayments should never exceed net income or jeopardise regular payments such as rent and utilities. Moreover, repayments should not replace regular savings, retirement savings or investments in the household budget.
Czechs borrow most often when they need to cover an emergency expense, with 35% of the population taking out loans for this reason. However, there is a similar percentage of people who intentionally avoid taking out loans. A quarter of the population, especially those with higher incomes, borrow mainly for long-term expenses, such as buying a car or a flat. Five per cent of Czechs also borrow to cover current expenses. 46% of those with a net personal income of up to CZK 15,000 per month do not take out any loans, while 19% of those with an income above CZK 50,000 per month do.
Kamila Fialová of the Institute of Sociology of the Academy of Sciences stated that the inability of some Czechs to repay their debts can lead to foreclosure. Currently and in the past, 22.5 % of Czechs or members of their families are in foreclosure proceedings. The characteristics of respondents whose households have been subject to foreclosure proceedings most often include a low level of education, low income and living in rented accommodation.
Tomáš Odstrčil, an analyst at Europe in Data, stated that half of the Czech population manages to save at least some money at the end of the month. Most often it is men, residents of big cities and people with higher education who use this money to build up a short-term financial reserve. The problem arises when people run out of their short-term and long-term financial reserves and do not know where to get the money.
In conclusion, many Czechs manage to save something every month, but a significant part of the population struggles to manage debts and faces the risk of foreclosure. People with lower incomes and less education are particularly vulnerable. It is important to carefully assess the budget and risks of loans to avoid long-term financial problems.
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