Many Icelanders in Massive Car Loan Debt Skip to content

Many Icelanders in Massive Car Loan Debt

Icelanders currently are 115 billion ISK (just under a billion USD) in debt in foreign currency car loans. More than forty thousand people owe car loans that are fully or partially in a foreign currency, reports.

Photo by Páll Stefánsson.

Out of these there are 4,400 individuals who find themselves in difficulty with the debt load, Minister of Commerce Gylfi Magnússon, said yesterday at Althingi, Iceland’s Parliament.

Birkir Jón Jónsson, the Vice-chairman of The Progressive Party, asked Magnússon about the foreign car loans and whether the Minister intended to help those who are struggling with them.

Magnússon answered that according to statistics from Central Bank, 80% of those who have a car loan, spend less than 20% of their disposable income on the payments. That should be manageable. On the other hand, 11% are in a much worse situation, spending over 30% of their disposable income on payments.

According to Magnússon, only a small part of the car loans are in Icelandic Krona.

The Progressive Party members demanded that the government address the issue, claiming that a flat disallowance of debt was obviously the most sensible solution.

Magnússon answered that a committee organized by the Ministers of Commerce, Social Affairs, Insurance and Justice was looking into the matter. A flat disallowance of debt would prove too costly, but specific actions in order to remedy these people’s situation were being considered.

For those who struggle the most with making ends meet, the car loans weigh in heavily due to the heavy debt load, even though the loans is usually much lower than that of housing credit, Magnússon explains to Fréttabladid.

According to Magnússon, in most cases loan operations own a mortgage in the car, or the ownership rights through leasing. Should the debtor default, the car would be repossessed and sold, the remainder falling on the debtor.

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