The Growing Credit Market in Russia

I am a strong supporter of mortgages, as for many families they are the only means of ever building any real equity in anything; trying to save and invest money while also paying rest is just too hard. I've never had one, but I get car loans, as in many cities (including Dubai) the lack of option in getting around by any other way make cars are a necessity, although some aspects are more distasteful, including higher interest rates, the tendency to sell cars according to the monthly payment rather than total cost to the buyer, and the willingness of dealers to extend credit to people who really can't afford it, long-term (just like mortgage brokers, they resell the loans while getting a commission for making it, so long-term default rates don't really bother them). Credit cards and other consumer credit programs are another story; they are quite often deliberately usurious and use tricks to make it difficult to pay the bills or avoid additional hidden fees.

All of this is a real issue in the US, where poor mortgage decisions and high debt (credit card and otherwise) have made it very difficult for some families to live solvently and spend any money in the economy. The Russian economy is still growing, but I see worrying signs that credit is about to Reach Russia in a big way. Car loans are widely available, at least here in Moscow, and credit cards are promoted everywhere. The waiting couch at my neighborhood travel agency even had fake credit cards pushing debt as a means of paying for vacations. The small room also had a large banner offering up to 600,000 rubles with no interest for 90 days. On the metro I see little paper ads promising credit in one hour for up to 3500 rubles for all citizens of the Russian Federation, while the magazines, television and the two fashion channels on TV promote a lifestyle 95% of the country can't afford. Hopefully things won't get too out of hand, but the way things are looking now many Russian consumers are heading down the same credit-abuse path of the US, if not planning to exceed it.