Which households use consumer credit in Europe?

Which households use consumer credit? This paper addresses the question using harmonized data from Eurostat�s EU-SILC survey for nine European countries in the period 2005-08. There is wide heterogeneity in participation in the consumer credit market, ranging from 15 to 46 per cent across countries. Most households relying on consumer credit are those whose head is young and well educated; they are large in size, revealing more pronounced consumption needs. According to life cycle theory, they use credit to increase their welfare by consumption smoothing. Moreover, they frequently have a current medium-high income as lenders prefer to grant loans to less risky borrowers. Nonetheless, a not negligible portion of those using credit, ranging between 8 and 16 per cent across countries, are poor. Consumer credit can also help in improving their welfare. However, poor households are more frequently delinquent. In 2008, between 2 and 11 per cent of all borrowers were in arrears; the same percentage among the poor is much higher, ranging from 7 to 25 per cent.