Ex­pert: res­i­dents’ pur­chas­ing power – with a sta­ble plus sign

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Latvia’s eco­nomic growth in re­cent years has had an ef­fect not only on the cap­i­tal but also res­i­dents’ pur­chas­ing power. Lo­cal busi­nesses’ eco­nomic ac­tiv­ity gas in­creased in re­gions and other cities in Latvia.

Pur­chas­ing power is higher in large cities. Nev­er­the­less, eco­nomic growth is felt ev­ery­where in Latvia. Norvik Banka’s Kurzeme re­gion of­fice man­ager Ag­nese Čerņevska de­tails the dif­fer­ences be­tween busi­nesses in the cap­i­tal and re­gions.

Loans usu­ally taken for mar­riage, travel and car pur­chase

De­mand for loan ser­vices in­creases along with con­tin­ued im­prove­ment of the eco­nomic sit­u­a­tion in the coun­try. «De­mand and pur­chas­ing power dif­fer for re­gions and small cities. De­mand is high for mort­gage loans and dif­fer­ent kinds of leas­ing. Fast loans are usu­ally taken for mar­riage, travel and ma­jor pur­chases. Car pur­chase is one of the most com­mon rea­sons why res­i­dents turn to banks for fi­nan­cial sup­port,» says the ex­pert.

Women pay more at­ten­tion to in­ter­est rate

Data from Norvik Bank show that the main cri­te­rion for res­i­dents when they pick loan ser­vice providers is in­ter­est rate in 62% of cases. «It is in­ter­est­ing that when pick­ing a ser­vice provider, women pay more at­ten­tion to the in­ter­est rate (67% of women and 58% of men). The sur­vey shows that res­i­dents take the least amount of time – up to one week – to use fast loan ser­vices for un­ex­pected life sit­u­a­tions, such as car repairs or med­i­cal ser­vices (36%). Re­spon­dents ad­mit­ted tak­ing the long­est time to con­sider fast loan ser­vices for ed­u­ca­tion (17%), house repairs (15%), and car pur­chase (14%). In such cases res­i­dents take up to three months and more to make their de­ci­sion,» says Čerņevska.

Fast loans – a prob­lem in re­gions

The ex­pert also men­tions that when it comes to loans and res­i­dents’ eco­nomic ac­tiv­ity, the fast loan mat­ter can­not go un­men­tioned. «The neg­a­tive ef­fect fast loans have on res­i­dents’ pur­chas­ing power and the need to re­solve this prob­lem has been in banks’ sight for some time. The prob­lem is very com­mon in re­gions. Work­ing with clients who turned to us with com­plaint about con­se­quences caused by fast loans, we have no­ticed that of­ten peo­ple be­come des­per­ate that this prob­lem is im­pos­si­ble to re­solve. In such cases the bank pro­vides free fi­nan­cial con­sul­ta­tions. There is al­ways a way to re­solve fi­nan­cial prob­lems. Norvik Bank has a large num­ber of clients that have turned to us for merg­ing fast loans. There are cases when clients had very high in­ter­est rate for their loan – up to 80%. As a bank, we are able to re­fi­nance com­mit­ments start­ing from 12%. This al­lows clients to di­vert their re­main­ing funds to their needs. This also helps im­prove the client’s pur­chas­ing power.»

In­abil­ity to as­sess in­sol­vency

«Peo­ple are not al­ways able to as­sess their fi­nan­cial ca­pa­bil­i­ties. In many cases, fast loans are more eas­ily ac­quired than bank ser­vices. Banks al­ways strictly eval­u­ate their clients’ sol­vency, put up spe­cific guide­lines and con­di­tions. The bank is al­ways open to co­op­er­a­tion – we are in­ter­ested in the client’s abil­ity to pay back their loan. We ex­plain to our clients that risks should be taken into ac­count when plan­ning fi­nances. Peo­ple have to know how to think in ad­vance, be­cause risks al­ways ex­ist, in­clud­ing the risk of los­ing a job. Will the client be able to sur­vive for three months with only sav­ings un­til they find a new job? Do they con­sider the pos­si­bil­ity of their new wage be­ing be­low their last one, which may af­fect their abil­ity to cover debts,» says Čerņevska.

Ra­tio­nal think­ing re­quired for fi­nan­cial mat­ters

Norvik Bank Kurzeme re­gion of­fice man­ager says the times when banks were con­sid­ered a threat should be left in the past. «Or way of think­ing needs to change: banks are co­op­er­a­tion part­ners that can help res­i­dents dis­cuss and re­solve prob­lems. Lack of knowl­edge causes many wrong opin­ions to form. Banks are in­ter­ested in co­op­er­at­ing with their clients, and they value their abil­ity to pay back loans. In af­fairs as­so­ci­ated with money, we rec­om­mend res­i­dents to thing ra­tio­nally, not emo­tion­ally. Peo­ple’s opin­ions are worth know­ing. Still, it is also im­por­tant to be cer­tain of your own opin­ion. Fake news have a ma­jor neg­a­tive im­pact on for­ma­tion of peo­ple’s news, espe­cially if a large num­ber of res­i­dents be­lieve it. We of­ten for­get to as­sess in­for­ma­tion be­fore ac­cept­ing it as is and shar­ing with oth­ers.»

Edijs Pālens/LETA

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