Luxembourg has been named the ‘most affordable’ European country in which to obtain a personal loan, according to a study by Lånea.
The loan expert firm used data from Trading Economics, the Organisation for Economic Co-operation and Development (OECD), and Numbeo to develop an index of European countries offering the most affordable options for personal loans.
The findings subtracted consumption expenditure per capita from the typical salary in each country, to calculate the disposable income. The total cost of a personal loan repayment of 10% the average salary (plus the national rate of interest) was then calculated as a percentage of the disposable income.
Luxembourg leads the way
As a result of these findings, Luxembourg claimed the top spot as the most affordable country for personal loans, with a monthly repayment of €626.76, equivalent to 18.98% of the average disposable income—the lowest percentage in the study. This calculation was based on a loan amount of €7,197.67 with a national interest rate of 4.5%, repaid over a year.
Ireland followed in second place, with a personal loan repayment of 19.27% of the average disposable income, amounting to €399.59 per month. This was based on a national interest rate of 4.5% applied to a personal loan cost of €4,588.57.
Denmark secured the third position, with a personal loan repayment rate of 19.33% of the average disposable income, totaling €469.53 per month. This calculation was based on a loan amount of €5,438.53 and a national interest rate of 3.6%.
The Netherlands (personal loan repayment 19.53% of the average disposable income) and Czechia (19.85% of the average disposable income) rounded off the top five, with Sweden, Norway, Estonia, Germany and Belgium also featuring in the top ten.
At the opposite end of the spectrum, the United Kingdom was identified as the least favourable country for taking out a personal loan, with a personal loan repayment amounting to 61.40% of the average disposable income, the study found.
Financial situation
“There are many things to remember when taking out a personal loan, and each person’s unique financial situation must be considered,” commented personal finance expert Nina Appelgren of Lånea. “Credit scores, interest rates, and repayment terms are all things to keep in mind.
“Make sure you understand the purpose of your loan and form a plan on how you intend to use the funds. If necessary, look for lenders that offer flexible repayment options, and be aware of any additional fees or charges that may incur during the application process.
“Compare different lenders and choose the one that is most suitable for you. Maintaining a good credit score will impact your ability to obtain a loan, but try not to borrow more than you need, or for a longer period than is required. Always ensure you can keep up with the repayments. Finally, it’s a good idea to read reviews to provide insight into customer service and satisfaction. Ensure you read the terms and fine print before you agree to anything.”
Loan Repayment as Percentage of Disposable Income
| Rank | Country | Loan repayment as % of disposable income |
|---|---|---|
| 1 | Luxembourg | 18.98% |
| 2 | Ireland | 19.27% |
| 3 | Denmark | 19.33% |
| 4 | Netherlands | 19.53% |
| 5 | Czechia | 19.85% |
| 6 | Sweden | 20.12% |
| 7 | Norway | 20.40% |
| 8 | Estonia | 20.50% |
| 9 | Germany | 22.01% |
| 10 | Belgium | 22.04% |
