Debt-free life has become a luxury

Havva Gümüşkaya

Consumers are now living their lives on debt rather than income. The number of personal loan users is rapidly increasing. As of March, 42 million 159 thousand people had one or more personal loans.

The average debt per person for personal loans, which consist of credit cards, overdraft accounts, housing, vehicle and consumer loans, exceeded 100 thousand liras for the first time.

According to data from the Risk Centre of the Turkish Banks Association, individual credit card debt reached 2 trillion 36 billion lira in March. The number of credit card users, which was 37.2 million in March 2024, reached 39.1 million as of March 2025.

DEBTS CANNOT BE PAID

There was a notable increase in the proportion of debts that will be settled within credit card debts. The settlement rate, which was 1.6% last year, rose to 3.9% this year.

KMH ACCOUNTS ARE EXHAUSTED

The use of Credit Deposit Accounts (KMH), one of the short-term borrowing methods, is also growing. Despite high interest rates, the increasing use of KMH accounts is raising their balances due to their easy accessibility and ability to meet immediate cash needs. KMH balances, which stood at 220 billion last year, reached 518 billion lira this year.

The number of KMH users has reached 30.5 million, with an average debt per person of 16,975 lira. The liquidation rate for KMH has risen from 2% to 3.6%. While KMH use may seem like a solution for sudden cash needs, it actually deepens the vicious cycle of debt being rolled over with more debt.

LIMITED ACCESS TO LOANS

Access to consumer loans has become more difficult due to tight monetary policies. The number of consumer loan holders fell from 13.4 million to 11.1 million in one year. However, the average debt per person rose from 66,318 Turkish lira to 97,575 Turkish lira.

The proportion of consumer loans subject to liquidation reached 5%.

HOUSEHOLDS ARE BEING DRAGGED INTO A DEBT SPIRAL

Prof. Dr. Yakup Küçükkale, who analysed the increase in credit card and KMH debts and the rise in the proportion of overdue receivables, highlighted that economic conditions are exerting increasing pressure on households.

Küçükkale pointed out that the decline in purchasing power, high inflation and the high cost of living have caused individuals to take on more debt to meet their basic needs, saying, "Short-term borrowing instruments such as credit cards and consumer loans are generally used to meet urgent cash needs. However, this increase in debt also highlights the limited repayment capacity and the financial sustainability challenges faced by many individuals."

According to BDDK data, Küçükkale pointed out that as of March 2025, there had been an increase of approximately 1056 % in credit card debt over the last five years, and that receivables in arrears had risen by approximately 110 %, saying, "This shows that not only is debt increasing, but the risk of non-payment is also growing significantly. The rise in the ratio of non-performing loans indicates that individuals are unable to repay their debts and that banks are struggling to collect these loans. The high ratio of non-performing loans, particularly in consumer loans and credit cards, reflects the deterioration in household income-expenditure balance."

Emphasising that there are several underlying causes for this situation, Küçükkale listed them as follows:

Economic Pressure: High inflation and the erosion of real wages are pushing individuals to borrow more. Credit cards may seem like a short-term solution with their ‘buy now, pay later’ mentality, but high interest rates are rapidly increasing the debt burden.

Debt Spiral: High-interest debt instruments such as KMH and credit cards are often used to cover existing debts. This makes it difficult to roll over debts and increases the risk of default.

Lack of financial literacy: Individuals' lack of knowledge about debt management and budget planning contributes to debts reaching unsustainable levels.

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7 OUT OF 10 PEOPLE THINK THE ECONOMY IS GETTING WORSE

The monthly Turkey Report for May prepared by Istanbul Economics Research and Consulting has been released. The number of people who think the economy is good has decreased compared to the previous month, while the number of those who think it is bad has increased.

There was a 2-point increase in negative assessments of the economy compared to the previous month, with 71% of participants stating that the current state of the economy in May was ‘very bad/bad.’ Those who said ‘neither good nor bad’ remained at 16%, while 13% of participants believed the economy was good/very good.

More than half of the participants were pessimistic about the future of the economy. The percentage of those who were pessimistic about the future of the economy increased by 4 points since March. Fifty-three percent of participants believe that the economy will be worse or much worse in a year. While 26% of participants believe that the economic situation will remain unchanged, 21% believe that there will be an improvement.

WE CANNOT MAKE ENDS MEET

The majority of participants said that their income was not enough to cover their expenses, with female participants more likely to give this response than male participants. More than half of participants in all age groups except the 25-34 age group responded that their income did not cover their expenses. The highest percentage of respondents who gave this answer was 54% in the 45-54 age group.

The highest percentage of respondents who answered ‘my income did not cover my expenses’ was among the unemployed at 66%, followed by daily wage earners at 64%. Approximately one in three retirees, unemployed individuals not seeking work, and government employees responded that their income barely covered their expenses in the previous month. The highest percentage of respondents who answered that their income more than covered their expenses in the previous month was among government employees, at 17%.

Note: This text has been translated from the original Turkish version titled Borçsuz hayat lüks haline geldi, published in BirGün newspaper on May 18, 2025.