All families have needs. Having a place to live, paying the bills, acquiring a means of transportation or simply being able to make and receive payments with a bank account. Financial services are essential to all households but some are excluded from access to basic financial products.
Even if at the time of signing for a credit or a mortgage everything is going well, many things can happen. All families are vulnerable when it comes to financial services. Over the years, financial products, including mortgages have become more complex. Families may be misled into taking the wrong decision, lower income families are particularly prone to taking riskier products, like loans in a foreign currency.
During a family’s life cycle, anything can happen: a spike in family spending, all of these situations can lead to not being able to pay back their loan. The results can be disastrous: getting new loans to pay for your old ones, falling deeper into debt and poverty, losing your belongings or even your home.
What are the alternatives?
Independent financial guidance and a good financial education and awareness of the risks of the different choices allow families to take good financial decisions at key moments in their family life. Budgetary education helps families manage their budget better, like save up money for unforeseen expenditure like illness or accidents, to make more informed consumer choices, and avoid falling into traps like multiple credit cards.
There can be solidarity in financial services, via the mutualisation of certain risks, which would allow even low income families to have access to a mortgage or credit.
Better laws serving the interest of families and consumers are fundamental in ensuring access to fair financial products and services like bank accounts, credits, mortgages and lifting people out of poverty. They should support alternative banking institutions. Some of these measures include social and micro-credit initiatives, access to basic financial services such as a basic bank account or capping interest rates and preventing usury practices. Banks should carry out better credit-worthiness checks to avoid reckless lending practices.