Social credit is credit for the poor, designed to prevent financial exclusion and over-indebtedness, and to promote the self-sufficiency of the borrower. Social credit is thus a kind of extension of social assistance.
Municipalities providing social credit. Currently, 30 municipalities in Finland offer their residents the opportunity to apply for social credit, which covers about 44 percent of the entire Finnish population. Providing social credit to municipalities is voluntary and credit terms (eg amount, eligibility criteria) may vary from municipality to municipality, but within the legal limits.
There is no official listing of social credit granting municipalities due to the voluntary nature of the service. Whether your home town provides social credit is most easily found on the municipal website or by contacting the municipal social services.
Who Can Get Social Credit?
Only residents of the municipalities that grant it can apply for social credit, ie they cannot apply for social credit in a neighboring municipality. You can get credit if you are poor and low income but still solvent. The following factors are taken into account when assessing solvency:
- the applicant’s disposable income and resources, and his or her earning capacity, taking into account his or her age, ability and other circumstances
- the applicant’s current expenditure
- debts of the applicant
- other factors affecting the applicant’s financial position
Social credit is primarily aimed at those who, due to their financial situation, are unable to obtain a reasonable loan elsewhere.
Where can I get social credit?
Social credit can be granted for legitimate reasons, such as getting your finances under control and breaking the debt cycle. Other credit granting criteria may include:
- securing housing
- overcoming the social crisis
- promotion of employment
- home purchases
Agreement on social credit
If the municipality approves the application for granting social credit, a written agreement must be drawn up. The credit agreement shall state the following:
- purpose of credit
- amount of credit
- credit rate
- the amount, maturity dates and other repayment terms of the loan
Regardless of the municipality, social credit is a cheap but not free loan. It may bear interest at a rate of not more than 6 months Euribor (= the reference rate set by the European Central Bank) and may not be charged on other credit costs such as opening fees or withdrawal fees. The profits accruing from interest income are collected by the municipality.
Quick facts about social credit
The latest study on social credit is from 2014. The survey was conducted by the National Institute for Health and Welfare. the following things:
- The average social credit was € 3,500
- A total of 1,053 persons were granted social credit
- 40% of social credit recipients were students, one third were employees and one quarter pensioners
- The most common reasons for granting credit were consumer loans and debts, and getting into financial control.