Consumer credit is a way to finance travel, ahead of the longest holiday in the pandemic, but it is not recommended

The trend indicates that the amount granted by financial institutions as consumer credit is recovering this year in the midst of the economic crisis and after the loss of jobs.

It is money (debt) that is used for regular household expenses, but is also spent on finance travel, pay for accommodation, food in restaurants, fuel expenses, car rental or airfare. The situation will repeat itself during the longest holiday of the pandemic so far, which will begin on October 30 and will last for five days until November 3.

For the holiday for the Day of the Dead and Independence of Cuenca, national COE issues recommendations

The tourism sector is one of the most affected by the lack of liquidity. People did not travel between the months of March and May 2020 (when there were three national holidays).

In the following they took up tourism trips, which remains to this day. The transfers are mainly within the country, indicates Holbach Muñetón, president of the National Federation of Chambers of Tourism (Fenacaptur), since there is instability in international departures because the pandemic continues and affects countries at different levels.

“People need and want to go on a trip and rest as a way to reduce stress and for this they use consumer credit among the options, but there is no expected recovery,” he says.

Additional holiday of November 3 is recoverable in Ecuador

The amount placed in consumer loans by banks reached $ 744 million last September, 30% more than in the same month of 2020 and nine million dollars more than in the same month of 2019 ($ 735 million), before the pandemic, according to figures provided to this newspaper by the Association of Private Banks of Ecuador (Asobanca).

The total balance consumed with credit cards went from $ 6,500 million in March 2019 to $ 7,442.4 million in the same month of 2020 and $ 7,400.4 million in this year. It is the latest statistical information on the matter published by the Superintendency of Banks.

The use of the credit card has not stopped and rather increased even during the months of confinement due to the COVID-19 pandemic. These amounts do not include what the cardholder finally paid in the time provided.

Guillermo Granja, an expert in financial planning and professor at the Ecotec University, assures that the option in periods of loss of income or employment is to use the credit card that was granted and was in use when the person was employed. “That is immediate, without paperwork, the amount that can be paid is deferred, the quota is calculated, that is why its greatest use is seen and this continues. There is no immediate verification of the client’s conditions so they can continue to use it, the opposite in the case of consumer loans that are given directly in which if they ask you for the last three payment roles and a work certificate ”.

The rate of delinquency of total consumer loans granted directly or through credit cards reached 3.48% last September, according to data from Asobanca, lower than that of September 2020 (6.74%) and that of the same month of 2019 (4.96%).

It must be taken into account that the amount considered in arrears varied after the Humanitarian Law approved in 2020, which implied the extension of terms and the rescheduling of unpaid installments, which is why it was previously considered delinquent debt and is no longer so.

The amount granted in consumer credit directly by banks and cooperatives and mutuals of the popular and solidarity economy decreased between March and September 2020 compared to the same period in 2019, but there is a recovery during this year.

‘I am of the third age and nobody gives me credit in Ecuador’; What options does this segment of the population have?

In the case of entities regulated by the Superintendency of the Popular and Solidarity Economy (cooperatives and mutuals) there is an increase, since between January and August 2019 they gave $ 2,274.9 million, which was reduced to $ 1,684.7 in the same period of 2020. But between January and August 2021, the amount granted for consumption already accumulates $ 2,955.7 million, 43% more than the same period last year..

Granja affirms that the banking entities began active campaigns eight months ago to grant consumer credit by sending emails to their clients in which they told them that they already had it pre-approved. “If you had a good credit behavior in the use of credit cards and the average balances that you maintain, then you received the mail. They told you you have $ 4,000 of a loan, just click here to do it virtually, we only need such documentation, that was a down payment. Or they told you that you have so many days left to activate your credit ”.

They are credits with terms of up to five years so the fees are relatively low. “In the end the banking business is the interest that will earn,” says the specialist.

Another strategy is the novation that private banks also apply. “It is the same that the BIESS applies (with unsecured loans). When 50% of the credit is already paid, then the bank offers to renew it by canceling the current operation and opening a new one, that is attractive for the reactivation of consumer credit ”.

Saving to pay in cash on trips is the most advisable

Financial experts recommend that credit should not preferably be used for short-lived expenses whose service or is short-lived, such as travel.

The best thing to do, says Candy Abad, a finance professor at the San Francisco de Quito University, is to save and pay most of the tourism expenses in cash.

“The best thing is to gather every month and make a fund for a trip. It is necessary to carry cash because in Ecuador there are wonderful places that can be adjusted to any budget and you have to make small payments and they do not accept credit cards, they even ask for loose. This moves the economy of these small towns ”, indicates Abad.

There is another type of tourism in which you can use a credit card, but with control because it is a very expensive means of borrowing. “It is preferable to do it abroad as a facility to pay, but you return and pay, that is, current payment. Internally, those who charge the cheapest prices do not accept card payments. The worst thing is to withdraw money from the credit card, since it should be used for investment expenses, rather than consumption. Maybe it can be used in a medical emergency, but not to travel since when you return you start paying the minimum and it is expensive ”, says Abad.

Making the minimum monthly payment of $ 25, for example, he adds, it can take up to seven years to cancel a consumption of $ 500 for the interest that you must cover. “You can enjoy it, we promote tourism, even if there is so much time, but it does not result in an economic problem for families later.”

Another option, says Abad, is to choose the holidays when you will travel. “Planning ahead, traveling by bus, there are places with low cost, most are concentrated on the beaches, but there are more options, that helps redistribute income from tourism, all in accordance with our financial planning.”

In the case of air tickets, it is advisable to buy a year in advance so that it costs up to half or less, says Abad. “In that case, the credit card is an adequate means of payment, even with the COVID-19 crisis they are allowing deferral of up to one year without interest, in that case it is appropriate.”

Granja points out that the best thing to do with a consumer loan is to pay off all the various debts that you have and therefore keep just one without using those credit cards. “But the human being is not a robot he needs to clear himself up and precisely these holidays are thought not only in the tourist reactivation but are also associated with what in marketing is called psychographic factors, which have to do with lifestyles and ways of having fun”.

So on a moneyless holiday, people use credit cards or a consumer loan. “If you already have it deferred in time and you want to use a part to clear your mind, there is no problem, as long as you have enough financial prediction that you have a future income to recover, and one of them is the famous tenth third that comes in December, then it is restored, it is as if you yourself had made an advance ”.

The problem is when you don’t have a job, then you have to avoid traveling because of what would be considered a luxury expense, says Granja. “Here the option is to do city tourism, walk through the parks, do free activities or go to my brother’s house to use the social club of the urbanization where he lives.”

The holiday of the dead is one of those that most energizes tourism, along with the carnival

Muñetón states that there is not so much optimism at the moment for the next holiday due to the announcement of mobilizations.

“We are uncertain about the mobilization call, everything depends on what happens these days to see if the (next) holiday occurs or not. If the indigenous people close the roads, it could take a toll on the tourism sector again and cancellations of reservations would begin since people will not leave for fear of road closures. The issue is that we are still in the pandemic and there is no liquidity, so everything is against it, it is not the time to have so many holidays, ”says Muñetón.

The holiday of the dead and the independence of Cuenca are the ones that generate the most income for tourism, along with the carnival. Before the pandemic when a holiday was great it generated up to $ 80 million with the movement of 1.2 million people.

Reserves are still slow, Muñetón says, without giving a percentage. “They are waiting for what happens with the announcement of the mobilization.”

The country’s tourist attractions that are going to be revitalized this year are Cuenca (Azuay), Baños (Tungurahua), the Spondylus route that borders the Pacific from Santa Elena to Manabí and Manta. “But Guayaquil and Quito are emissive (exit) markets that are not going to become more dynamic, now we need to produce so that there is additional money in our pockets,” says Muñetón.

The pandemic, he adds, caused the loss of 530,000 direct jobs, of which 120,000 are in the tourism sector. “There are more than five hundred thousand people who are not willing to spend or borrow to travel,” he says.

On the last holiday of October 9 there was an occupancy that ranged between 68% and 78% of the hotel capacity in Guayaquil, which is good and an exception, since on average it had had up to 30% this year.

In Salinas there was an occupancy of up to 60% and on the Spondylus route it reached almost 80% in the last holiday, according to Fenacaptur.

In Guayaquil, more than 80% occupancy is expected for the upcoming deceased holiday, if all goes well. “The point is that the average rate is 55% of what was charged before the pandemic for lodgingThis means that the lost money has not been recovered, ”says Muñetón.

These reasonable prices are in hotels whose owners or shareholders already have their infrastructure created and canceled years ago, says Granja. “They can sacrifice a fee in order to attract customers and make up a little of what they lost during lockdown due to the pandemic.” (I)