Norway is one of the richest countries in the world. Still, Norwegian households are seeing a rapid growth in consumer debt, which leaves economists worried. The rising debt ratio might leave some households at risk of borrowing more than they can afford.
The Norwegian economy scores well above most other developed countries when it comes to quality of life and governance. Norway is considered one of the best countries to live in, with low inequality and a solid welfare system. A strong national economy might also be the reason why banks tend to be more flexible when it comes to giving out high-interest loans.
Increased Household Debt
The increase in household income is closely related to an increased cost-of-living. To avoid this gap, Norwegians often tend to rely on their credit card. And as we all know, credit cards are one of the most expensive ways to borrow money.
During 2016, norwegians increased their consumer debt by 12 billion NOK. This equals a growth of 15,3 percent from the previous year. By comparison, the total household debt grew by 6.4 percent, which includes consumer loans, student loans, car loans and mortgage loans.
As we can see, the biggest growth is high-interest debt. The growing interest in consumer loans has created a booming market for credit card companies, which in return has made it easier than ever to apply for a credit card.
Credit Cards – Economical Flexibility or Risky Business?
Over 300.000 norwegian households have an average credit card debt of 60.400 NOK. In other words, one in five of the 1.3 million norwegian households with credit cards are struggling to cope with their debt.
In general, one out of four are only paying the minimum payment each month. That means, if you are one of the 300.000 people with a credit card debt of over 60.000 NOK, it will take you 17 years to get debt-free.
According to Norwegian debt collection agencies, there has been a drastic increase in collection debt cases regarding credit cards and consumer loans. This is seen as a distressing trend and is argued to be caused by a mix of increase in interests, the housing market, aftermaths of the financial crisis and the explosion of loan offers and credit cards on the market.
Consumer Loans – research the Market
Even though you should never loan more money than you can manage to pay off, a consumer loan doesn’t have to be the death of your private economy. The massive market of consumer loans and credit cards have certain benefits for the consumer, in that the growing competition generates better interests.
If you are in need of extra finances, you would be well served by investigating the market to find a loan that suits your financial situation. For instance, you can get better interests on a consumer loan compared to a credit card. You should also choose a loan that fits your personal economy, in regards to terms and downpayment.
Refinancing – Take Control Over your High-interest Debt
For people with a huge high-interest debt, such as credit card debt, refinancing might be the best way to go. Refinancing is the replacement of an existing debt obligation with another debt obligation under different terms. The goal is to get a cheaper loan and better terms, such as better interest rate and better overall management of the debt.
Axo Finans is a financial agent that offers refinancing loans to their customers. One of the greatest benefits of using a financial agent when you are looking for a loan, is that you get your application sent to several banks at once. Not only will this save you valuable time, you will also get the best offer on the market – according to your personal situation.
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Anthony Amaradio is the Chief Strategist and Founder of Select Portfolio Management, Inc. (SPM). The ...