Delinquency increases and affects more Brazilians over 60 years old

The queue of indebted people over 60 years old —many of them retired from the INSS (National Social Security Institute)— grew between 2021 and 2022, according to Serasa data. The most recent numbers, from April, show that the list of debtors in this age group gained 751,745 people in one year.

In April 2021, there were 10.7 million people over 60 in default, according to Serasa. This year, there are 11.4 million, up 7%. The data show that there was an increase in default in all age groups. The biggest growth occurred in the youngest group, up to 25 years old, with a rise of 9%, and the second biggest jump was among the oldest.

In all, the country has 66.1 million in debt, a record in the historical series started in 2016. Before, the peak of indebtedness had been reached in April 2020, with 65.9 million debtors. Current debts total, on average, R$ 4,107.3.

According to the chief economist at Serasa Experian, Luiz Rabi, default, in general, is linked to inflation and high interest rates. However, for him, especially those over 60 years old, with most of them retired, the debts are a direct result of the soaring prices.

“Basically, inflation is the main factor. It was precisely when inflation exceeded 10% that delinquency started to rise, in October 2021. You can’t keep up with double-digit inflation, wages don’t keep up, the pension readjustment too.”

The economist also states that, even with the replacement of inflation in Social Security benefits, the updating of values ​​does not follow the increase in spending for this age group. “Inflation is running ahead of the readjustment, which is based on the previous 12 months. It also depends a lot on the consumption basket, and older people have medicine, health insurance,” he says.

The IPCA-15 (Extended National Consumer Price Index-15), which is a preview of official inflation, reached 12.04% in June.

High interest rates make credit more expensive

The rise in interest rates, which the Central Bank began to intensify this year, has also contributed to higher indebtedness. Currently, the basic rate (Selic) is 13.25% per year. “We know that high interest is the main remedy to fight inflation, but when it rises along with inflation, it is a factor that drives delinquency because they make debts more expensive.”

Rabi’s guidance is for consumers not to commit more than 20% of their budget to debt. “Once you go beyond that, the chance of defaulting becomes exponential, it’s very easy.”

Payroll: retiree indebtedness can reach 45% of the benefit

Payroll loans, the cheapest in the country, can be a solution for those who are in financial difficulties, but it can also compromise income and lead to indebtedness. In this sense, the measure approved by the Chamber, which raised the assignable margin to 45%, is a cause for concern.

Under the proposal, which still needs to go through the Senate, retirees and other INSS beneficiaries, as well as those who receive Auxílio Brasil, could commit up to 40% of their income to a payroll-deductible personal loan and up to 5% to a credit card.

Currently, the limit is 40% of income from credit, 35% from personal loans and 5% from credit cards.

The measure is controversial. If, on the one hand, it is cheaper credit, on the other hand, it facilitates indebtedness. The ideal, according to the expert, is to renegotiate the debts. “Today, Brazilians owe, on average, to four different institutions. They need to renegotiate, claim a discount, increase the number of installments, and put in installments that fit in their pocket.”