A third of the citizens of Montenegro are in debt, with their total loans to banks nearing two billion euros. According to the Central Bank of Montenegro, most requests are for housing loans, while about eight percent are for refinancing. Many citizens express that they cannot manage without loans, while financial advisors urge caution.
Due to the constant rise in prices, managing household budgets has become increasingly difficult, prompting many Montenegrins to take on loans.
Maja Aleksić, a personal finance advisor, believes that salary increases through the “Europe Now 2” program will likely lead to new debts. “We saw this with ‘Europe Now 1.’ My advice is for people to refrain from taking on more debt; we are living in a time of high inflation,” Aleksić warns.
Surveyed citizens report that living without loans is challenging if one desires a decent lifestyle. Some respondents mentioned they share loans with family members, such as for their children or spouses.
Citizens need to be well-informed about loan terms, interest rates, and types of loans available, but they have limited options, according to Aleksić. “Banks offer similar interest rates, leading citizens to choose the closest bank with the quickest procedures. This is the reality in Montenegro,” she states.
Taking out loans is particularly risky when finances are already strained, and the risk also depends on the loan’s purpose. “If the loans are for starting private businesses, especially without a prior business plan that assesses risks, then it can be risky,” Aleksić explains.
Many people refinance old debts with new loans, but refinancing is justified only if it lowers interest rates and overall debt. However, this is not often the case, according to the finance advisor. “When refinancing, you end up paying interest multiple times on the same principal because each time you sign a new contract. It becomes difficult to escape from debt,” she concludes.
