The deterioration of economic conditions has affected the number of people in arrears in Chile.
In total, just over 4 million people are delinquent, the highest level since late 2020 reported the latest report available from Equifax and San Sebastián University (USS) corresponding to the third quarter of 2023.
“This increase meant that the average default reached $2,072,012, representing an annual increase of 1.9%,” the study said.
He Less dynamism of the economy has an impact on the savings capacity of households and also means a higher level of indebtednesswhich contributes to difficulties in obtaining financing due to the tightening of credit policy.
For José Uribe, an academic at USS, in the context of a tighter economic situation and an unemployment rate approaching double digits, “People who don’t have (liquidity) will eventually have to go into debt.”
As for the profile of those passing through this panorama, he added that “the most affected age groups will be young people from 25 to 29 and seniors because of their ability to generate flow.”
The CEO of Patrimore, Sergio Tricio, for his part, explained that “when we have an inflationary period (…), an imbalance arises in which prices rise a lot, the population spends more and, consequently, salaries increase.
In addition, he agreed with Uribe on the effect of unemployment on the financial situation of households. “It was a difficult year, the economic downturn and economic difficulties. This makes it difficult for people to generate income and increases unemployment,” Tricio said.
Re-negotiate debt or use a line of credit?
Faced with more tightness, experts highlight some elements of how to deal with late payments.
Experts have pointed out that financial education is essential for avoiding debt because it is aware of the amount of income that people have.
For Francisco Verdugo, DVA Capital Head of Distribution, In Chile, there is “great financial inclusion that has not been accompanied by financial education. We see the negative result in debts and torts.”
University of Chile FEN academic Jorge Berríos agreed that this was a major factor. “People think it’s easy to swipe a card because you can’t see how much debt you have. “Sometimes you don’t understand how much debt you’re in.”
“It is ideal to anticipate these situations and try to take measures. Use debt properly and look for ways that debt can help us overcome these difficulties,” Tricio said.
With everything, Experts warn of the effects of high rates when using a line of credit. For José Uribe, this possibility is “the worst thing to do”.
Berríos believes that this loan is the most expensive option and causes the amount of debt to grow exponentially.
As for conducting a renegotiation, he opined that “in order to be able to pay, it is considered a good alternative. However, he cautioned that “at this point, renegotiation means paying a higher rate and extending the due date.”
Borrower profile
According to Equifax and USS, 44% of defaulters belong to socioeconomic group D with an average income of $651,000 per month. The report revealed that his debt was four times that amount.
In general, young people have recently had the greatest impact on late payments. According to the latest report, the largest real year-on-year increase was recorded by the group between 25 and 29 years of age, which grew by 11%.