Consumers increasingly opt for installment-based purchasing methods

The world of consumer credit has seen a significant shift in the past year, with the number of new installment loans reaching over ten million, marking a 17,100 contracts increase from the previous year. This surge is largely attributed to the strong growth in small loans under 1,000 euros, which now account for every second installment loan.

In 2020, small loans constituted about one fifth (20.4 percent) of the newly concluded installment loans. However, last year, this figure rose dramatically to 49.8 percent. This trend is particularly noticeable among younger generations aged 18 to 34, although the increase is less pronounced compared to older age groups.

Notably, people in the age group of 35 to 44 have experienced a substantial increase in installment loans, with the number rising from around 4.1 million in 2020 to 5.2 million last year. On the other hand, the number of loans over 1,000 euros increased by a relatively moderate 3.9 percent compared to the previous year, reaching around 5.03 million contracts.

The European Union (EU) is implementing a consumer credit directive that will require an assessment before granting small and short-term loans (up to 200 euros) starting October 30, 2023. This directive aims to protect households with low incomes from excessive debt and provide more protection for consumers taking out mini loans.

The change will not affect ongoing loans. By November 2025, EU member states are expected to implement the directive's requirements in national law.

In a broader effort to regulate online payment methods, the German government presented a draft bill in June 2025. This includes the establishment of new online payment methods such as EasyCredit installment purchase and the introduction of a European alternative to PayPal named Wero.

Wero, developed by banks including ING, many Sparkassen, Volks- and Raiffeisenbanken, and the Postbank, is set to enable instant payments via mobile numbers or emails. It is designed for both online and offline retail use and is expected to be rolled out starting autumn 2025 and 2026, respectively. Additionally, starting October 9, 2025, all banks must implement mandatory payee name verification to enhance payment security according to new EU regulations.

Consumer advocates regularly caution that consumers may overestimate their financial capacity and buy more on credit than they can afford, especially when financing is offered at zero interest. The new directive will require banks to provide clearer information about the costs involved in borrowing money.

Shops are being encouraged to offer a variety of payment methods to cater to the diverse preferences of consumers. As the landscape of consumer credit and online payments continues to evolve, it is crucial for individuals to make informed decisions and manage their finances responsibly.