Financial Struggles in Mexico: Why People Rely on Loans for Daily Expenses
For three out of ten Mexicans, their income does not stretch to the end of the month. Faced with this situation, households increasingly turn to loans to cover their daily expenses, especially during periods like January’s slope when liquidity is crucial to manage outstanding debts and upcoming yearly payments.
Luis Rangel’s Insight
Luis Rangel, Vice President of Credit at Kueski, confirms that this practice is common during three seasonal periods: January’s slope, summer, and back-to-school season along with high consumption periods like Buen Fin and December expenses.
According to Kueski’s data, 56% of loans requested during January’s slope are used to organize expenses and ensure immediate liquidity.
Factors Contributing to the Trend
Several factors consistently occur at the beginning of the year, such as excessive December spending on holidays, gifts, and various celebrations, which typically do not align with a household’s regular income. Additionally, mandatory payments like vehicle taxes, insurance renewals, school tuition fees, and clothing for back-to-school occur amidst usual annual price increases.
Rangel notes that these factors, combined with the Mexican market’s lack of robust financial planning, typically leads more users to seek credit. In Kueski’s case, 91% of clients request financing to better organize their finances.
Increasing Loan Amounts
A Credmex survey reveals that Mexicans not only seek credit to cover daily expenses but also desire higher loan amounts due to constant price increases in the country.
- Only 25% are satisfied with their current credit line.
- 75% wish to obtain larger loans to cover daily expenses.
Among users surveyed, 25% needs credit for emergencies; 15%, for family expenses (especially daily necessities); 6%, for medical expenses; and 4%, for entrepreneurial funds.
Credmex highlights that emergencies and daily household expenses are the primary reasons for seeking credit. This aligns with Banco de México’s report, where 44.5% of people’s expenses equal their monthly income, more than 20% spend beyond their income, and only 19% of Mexicans spend slightly less than their monthly salary.
Insufficient Monthly Income
According to the National Commission for the Protection and Defense of Financial Services Users (Condusef), only 8% of Mexicans always have money left at the end of the month, while 30% struggle to make ends meet.
- Borrowing: Four out of ten people resort to informal loans from friends or family to cover their expenses.
- Reducing Expenses: 68% of survey respondents reported cutting back on monthly consumption to make their income last.
- Using Savings: 32% of respondents used their “cochinito” (emergency savings) to manage their expenses.
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