Loans in East and West Germany: Big Differences?

Loans in East and West Germany: Big Differences?

The fall of the Berlin Wall, which unified the former FRG and GDR into one state in 1989, has not yet compensated for all the differences between East and West Germany, particularly with regard to the financial area of 

​​modern Germany. The still existing differences in wages also create differences in the financial behavior of German citizens. A German comparison portal has carried out an online survey to compare the credit behavior of citizens of the old and new federal states.

Average loan amount over 10,000 USD

Average loan amount over 10,000 USD

The study showed that consumers in eastern Germany apply for smaller loan amounts on average than their counterparts in the western part of the country. The average credit of East German borrowers is around USD 10,800, with West Germans generally borrowing around USD 12,000 on average. 

Interest rate difference relatively small

Interest rate difference relatively small

The difference in interest rates in East and West Germany is not as significant as one might think. If we take, for example, a loan amounting to 10,000 USD with a 84-month loan term, this results in an effective interest rate of approx. 4.83% from West German banks and 4.97% from East German credit institutions. The interest rate difference between the old and new federal states is around 3 percent.

Differences in loan terms and uses

Differences in loan terms and uses

The east-west comparison also revealed that borrowers in eastern Germany opted for shorter loan terms than consumers in western Germany. The average term of a loan is 44 months in the east, while West German citizens can afford a longer term of 47 months on average. Above all, this fact testifies to East Germans’ efforts to pay off their loans more quickly.

In the east, consumers take out 49% of loans to finance consumer goods, such as:

  • technology
  • new furniture
  • other major purchases

40 percent of the loans are used by East Germans to buy a car.

In western Germany, buying a car is the most popular use of a loan (42% of all loans), and only then does a consumer loan follow with 41% percent.

Women apply for less money

Women apply for less money

On average, women borrow less than men because of frugality or for other reasons that the study has not found. Female customers in eastern Germany apply for an average loan of around 8,500 USD, while male borrowers take an average of around 9,300 USD on credit.

In the West, things are a little different – women receive an average of around 9,900 USD from a bank as loan money, with men applying for an average of around 11,000 USD as a loan amount.

In terms of age, almost 40% of borrowers in western Germany are over 50 years old, while in eastern Germany only one in three (33%) are over 50 years old and takes out a loan.

Conclusion: The financial situation and credit behavior of citizens in East and West Germany still differ, despite the turn in 1989, although the differences are not so serious on average and are mostly based on the difference in income.


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