Twenty-five years ago, the Wall fell and the two German states, which until then had been separated, became once again a single state. But not in all areas are the differences between FRG and the former GDR completely balanced. In addition to the still existing differences in wages, differences in financial behavior are also recognizable. Thus, a large German online comparison portal has taken the credit behavior of East German citizens with the West German national under the microscope. The result of this investigation revealed that people in the East are applying for significantly less credit than people doing in the so-called “West” of the Federal Republic. On average, the lending volume there is 12 percent higher than in the East. It is interesting, however, that the difference in interest rates for loans between East and West is nowhere near as serious, but more on that later.
Loans over 10,000 euros the rule
The loans taken up by the citizens in the East between July 2014 and June 2015 reached an average of € 10,369, whereas the average loan amount of € 11,585 in the West was significantly higher. To what extent the still existing wage differentials between East and West could play a role in the granting of the loan or the loan amount is not clear from the study of the comparison portal. On the other hand, it is interesting to look at the level of loans by federal state, because here in the west are Bavaria, Baden-Württemberg at the forefront, whereas in Saxony, Thuringia and Mecklenburg-Vorpommern the lending volume is the lowest. Obviously, the demand for credit is highest in the federal states, where current statistics show the highest per capita income. Generally speaking, however, the loan amount shows a clear decline, because only 1 year before, the average loan amounts were still well over 15,000 € nationwide!
Income Does Not Affect Interest Rates on Credit!
As mentioned at the beginning of the article, the difference in interest rates in the East-West comparison is not so severe compared to the loan amount, because for a sample loan of € 10,000 with a maturity of 84 months, banks in the West estimated an average effective interest rate of 4.83 percent. Customers from Eastern Germany received this loan combination at an average effective interest rate of 4.97 percent. The interest differential between East and West is thus around 3 percent.
Faster repayment of loans in the East
As a final finding, it also became apparent that East German borrowers are aiming for a much faster repatriation of a loan taken compared to the West German citizen. On average they opt for shorter loan terms (44 months in the east, 47 months in the west). The loans are taken up in the East mainly for the financing of consumer goods (49 percent), such as furniture or technology and motor vehicle financing (40 percent). In West Germany, on the other hand, car buying is the most common reason for borrowing (42 percent) – followed directly by consumer credit (41 percent).