K&H: What do young people spend their worker’s loan on and where are their personal loans?

A significant change occurred in the personal loan market this year. According to K&H data, the average amount of personal loans issued by the financial institution between the beginning of January and the end of November was 2.4 million forints, which is 50 percent higher than the 1.6 million forints typical for the same period of the previous year. The increasing average amount can be partly explained by the increase in wages.

A personal loan remains one of the fastest and easiest forms of financing to apply for, with free use and a shorter term being the main attraction. At the same time, K&H draws attention to the fact that responsible borrowing and advance planning have become even more important due to the higher loan amounts: the bank always examines the clients’ income situation, existing credit burdens and whether the repayment installment can be safely assumed in the long term.

New entrant: employee loan

“This year’s novelty in the personal loan market is the employee loan offered with state interest subsidies, which can be applied for by young people under the age of 26 who meet the loan criteria. Based on the contracts already concluded, the average amount of the employee loan is 3.94 million forints, meaning that those affected are maxing out the opportunity, as the amount of the employee loan can be a maximum of 4 million forints. This partly indicates that the product is primarily used for larger one-off expenses that exceed their savings but do not yet justify a classic mortgage”

– said Gergő Molnár, Head of Retail Marketing at K&H.

The average term of the employee loan at K&H is 9.7 years, which is also very close to the maximum term of 10 years set by law for employee loans. Thanks to the longer term and the state interest subsidy, the repayments are typically at a level that many young people at the beginning of their careers can safely fit into their monthly budget. The purpose of the scheme is precisely to enable young people to take major steps towards creating an independent existence under predictable conditions even in their early career years.

Real estate, car, refinancing – these are what workers’ loans are used for

Based on K&H’s experience, the most common purpose of workers’ loans is real estate: this includes renovation and modernization. It is also when young people supplement their own strength in a larger home purchase or housing project.

The second most common purpose is buying a car. The third is refinancing: many young people use workers’ loans to replace more expensive, previously taken out loans or partially fragmented debts with a more favorable, more predictable scheme. This can mean not only a lower monthly burden, but also a more transparent financial situation, which is a basic condition for responsible money management.

Responsible borrowing and conscious financial planning

K&H emphasizes that conscious borrowing is key, even in the face of state interest subsidies and more favorable conditions. The bank always encourages customers – especially young people – to prepare a detailed budget before borrowing, to think about their expected income trajectory, and to also take into account that their life situation – such as place of residence, workplace, starting a family – may change significantly in the next 10 years. The personal loans and workers’ loan structures have been designed to enable stable, transparent and predictable repayments. According to K&H experts, in the current environment, those young people who use preferential options – such as state interest subsidies – not for short-term consumption, but for longer-term value creation, such as housing, mobility, or settling and stabilizing their financial situation, are the ones who fare best.