"Borrowing money to consume" cannot be done arbitrarily
As the Spring Festival approaches, coupled with banks’ preparations for a “good start”, consumer loans have launched a “price war” again, and some interest rates have dropped to 3% or even lower.
Recently, many commercial banks have launched various promotional activities, some are issuing coupons, and some are guiding borrowers to "group together", and consumer loan interest rates continue to fall.
In the traditional concept of many people, the behavior of "borrowing money to consume" is not encouraged. As the saying goes, only spend when you have money, and don't spend if you don't have money.
But in fact, as a consumer credit model, "borrowing money for consumption" has certain benefits in enhancing consumption capacity, improving consumption conditions, and alleviating the contradiction of insufficient domestic total demand.
Currently, my country's domestic demand continues to recover, and service consumption continues to grow rapidly. For the whole of 2023, service retail sales increased by 20.0% compared with the previous year.
Currently, consumer credit in my country includes three levels: long-term, medium- and long-term, and short-term.
Long-term consumer credit is represented by personal housing loans, medium- and long-term consumer credit is represented by car loans, and short-term consumer credit is represented by common "consumer loans."
Consumer loans cover a wide range of areas, covering almost all aspects of clothing, food, housing and transportation, such as loans for decoration, loans to buy home appliances and daily necessities, etc.
It is especially helpful to solve residents' "short-term and frequent emergency" consumption needs and relieve short-term liquidity pressure, so it is also called "working capital" and "urgent money."
For example, when you find that the price of a new piece of furniture has been reduced and you want to buy it quickly, but a large amount of funds are temporarily unable to be withdrawn from financial products, then a consumer loan can come in handy.
However, although "borrowing money for consumption" is beneficial, it must be reasonable and moderate and not arbitrary.
In January 2023, the State Council executive meeting proposed a reasonable increase in consumer credit, and the word "reasonable" attracted much attention from the market.
The key to being reasonable is to grasp the right balance, making good use of consumer loans, but also being wary of the risks of over-indebtedness and long-term debt.
If the borrower's asset and liability status is unhealthy and the repayment cash flow is unstable, consumer loans may evolve into a game of "taking down one thing to pay for the other", which deviates from the original intention of "promoting consumption".
Borrowers should develop healthy borrowing habits and live within their means.
First, you must analyze and judge your monthly cash flow status and total annual income, and try to keep your cash flow stable.
Second, we must scientifically plan the total amount and term of borrowing based on income fluctuations, and reasonably control the level of assets and liabilities.
Under normal circumstances, the borrower's monthly repayment expenditure should not exceed half of the family income. Especially for young people, they should not borrow blindly through methods such as "using a card to maintain a card" or "paying a loan back with a loan".
Financial institutions and Internet platforms must be prudent and prudent and not rush for quick success.
At present, for the purpose of profit-seeking, some financial institutions either over-invest customers or over-grant credit. This has led to some borrowers with poor credit qualifications and weak repayment ability to borrow money, or even borrow a lot of money.
What needs to be more vigilant is that borrowers sometimes borrow money not only from one institution, but from multiple institutions, which may lead to the risk of "shared debt".
Next, financial institutions and Internet platforms should take measures to effectively prevent the problems of "undue loans" and "excessive loans" caused by excessive sinking and excessive credit extension, standardize business development, and do a good job in risk prevention and control.
Financial management departments must seize the opportunity early and take precautions.
On the one hand, we will continue to improve the social credit system, gradually open up credit data barriers, and promote the interconnection and sharing of credit information on the premise of legal compliance, safety and effectiveness, and lay the foundation for preventing "shared debt" risks.
On the other hand, we should establish an effective consumer credit constraint mechanism, set the number of institutions that individuals can borrow from, and the upper limit of credit limit, and effectively prevent the risk of "shared debt".
In addition, financial management departments must strictly inspect and enforce accountability, and use modern technological means such as big data to effectively identify various tricks used to misappropriate consumer loans, so as to give full play to the beneficial functions of consumer loans in convenience, benefiting the people, and promoting consumption.
Guo Ziyuan Economic Daily