How to protect your finances when the economic downturn hits Sweden

The coronavirus crisis has had an effect on many people's finances, whether you've seen a reduction in working hours or salary, or are wondering whether to take advantage of the option to halt mortgage repayments. Here's a look at what economists advise for average savers.

How to protect your finances when the economic downturn hits Sweden
Paying with a credit card can give you added protection during an uncertain time for consumers and companies alike. Photo: Fredrik Sandberg/TT

What makes most sense for you will ultimately depend on your personal circumstances, including essential outgoings, whether you have savings or how much you have saved, as well as your plans for the future. But this is what the experts advise for the average person.

1. Don't make drastic decisions when it comes to your savings

“When you're panicking, perhaps you don't make well thought through decisions. But try to stay calm and don't panic-sell your funds. If you do that, you risk missing the rebound when funds go up again,” advises Frida Bratt, savings economist at Nordnet. 

Maria Landeborn at Danske Bank has the same advice: “'Sitting still in the boat' is the best strategy for more or less everyone. We do worse deals during major events, so think long-term. If you save every month, you should continue doing that. When it comes to your savings, you should have already made your decisions. These decisions shouldn't be made during an urgent crisis,” she says.

2. Don't buy a property before selling

If you're planning to move, think carefully about the order you do things in, in order to make sure you're working within your budget.

“If you buy a property now, you're buying in a market which hasn't yet been affected notably by the coronavirus crisis. But if you're then going to sell later, you risk selling in a market which has been affected, because changes can come quite quickly. It's good to have the calculation ready and to know what you have to work with. Then maybe you can stay with relatives or friends during the in-between period,” says Bratt.

A sign outside an apartment viewing. Photo: Tomas Oneborg/SvD/TT

Landeborn also sees advantages to selling your current property first.

“It's good to have an extra think when it comes to property sales. Property isn't so easy to sell as it was just a few months ago. There are a lot of bostadsrätter (tenant-owned properties) on offer and prices have gone down over the past six weeks. They may go down further. You should consider selling first, but set the move-in date for six months away so that there's enough time to find something new [for yourself],” she explains.


3. Don't stop repaying your mortgage

Requirements to amortise household mortgage loans have been temporarily suspended. 

Amortisation is paying off part of the loan itself, and not just the interest, which was previously possible with interest-only mortgages. But under rules first introduced in 2016, people with a mortgage for 50 percent or more of their total property value must amortise at least one percent of the loan value each year. That rises to two percent for people whose loan accounts for 70 percent or more of the total value.

But this has been halted, so that property owners can instead only pay off the interest on their mortgages during the coronavirus crisis. 

However, many experts advise against taking advantage of this opportunity, unless you absolutely have to, for example if you have lost your job or do not have a savings buffer.

“You should continue amortising. You increase your own security by paying off the loan on your property because you get a lower loan-to-value ratio,” says Landeborn.

“If you choose to stop paying off your loan, you have to have a plan,” says Bratt. “One idea could be to put the money in a buffer or a savings account; it shouldn't be spent.”

As for whether you could consider investing that money in funds, Bratt advises: “That's not necessarily wrong, but then you have to already have a buffer and a loan-to-value ratio that isn't too high. It also depends on how your finances look otherwise.”

4. Don't stock up on gift cards

Buying gift cards for future use is one way to support businesses which might be struggling due to diminished demand during the crisis. But it's important not to put more money into vouchers and gift cards than you would be happy to lose, in a worst-case scenario.

“I think you should be careful with buying or giving away gift cards. You don't know what's going to happen with the company you're buying them from, in a few months it might have gone bankrupt, so it can be better to give cash as a gift instead,” says Landeborn.

Bratt agrees, saying: “If you buy a gift card, you've paid for a product or service before you've received it. If the business goes bankrupt, you as a customer are at the back of the queue behind other creditors. You probably won't get your money back. You can absolutely buy gift cards to support businesses, but you should be aware of the risk.”

Photo: Fredrik Sandberg/TT

5. Don't stop consuming, and use your credit card (but don't overspend your budget)

“Although you should be careful with things like gift cards it is important that we keep supporting local chains, shops and businesses. There's an increased risk that they won't be here when this is over. If you can afford it, help to support them by buying a takeaway lunch or buying clothes for summer. We have to keep the wheel turning,” says Landeborn.

“There are many businesses going bankrupt, so don't forget to support the ones you want to stick around,” adds Bratt. 

She adds that there are additional benefits to paying with a credit card. “There is an increased risk with actors on the market now, so there's an extra security with card payments. There you can set requirements in a completely different way compared with paying with cash.”

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What happens if you don’t pay a bill in Sweden?

Sweden's Enforcement Authority is responsible for collecting unpaid debts, fines, and declarations of bankruptcy. So, what happens if an unpaid bill reaches the Enforcement Authority, and can you do anything if you have a black mark on your record?

What happens if you don't pay a bill in Sweden?

What happens when you have a bill?

Usually, if you have a bill in Sweden, you will receive an invoice (faktura) either digitally or via post, which will include details such as the amount owed, who to pay and the date payment is due (förfallodatum).

If you don’t pay the invoice in time, the person you owe money to may turn the case over to inkasso, or a debt collection agency, who will again send you an invoice for payment, plus the agency’s fee.

If this invoice goes unpaid, the Enforcement Authority will get involved.

The Swedish Enforcement Authority, Kronofogden in Swedish, is responsible for collecting unpaid debts. It does this by providing advice and support to those who are unable to pay their debts, as well as helping creditors – such as, for example, landlords whose tenants have not paid their rent.

The debt collection agency will pass unpaid bills on to them, and you may receive a betalningsanmärkning or black mark on your credit record.

Before you receive a black mark, however, you will first receive an ansökan om betalningsföreläggande from the Enforcement Authority. If you pay this in time, your debt will not be registered as a betalningsanmärkning.

There are some types of payment where you can receive a betalningsanmärkning without the bill going through a debt collection agency first. These are usually payments owed to the state, such as unpaid tax, unpaid student loan repayments or unpaid municipal parking fees.

You are unlikely to come into contact with the Enforcement Authority unless you miss or forget to pay a bill.

What happens if you get a black mark?

A black mark can have pretty major consequences – it can stop you from hiring a car, getting a credit card, borrowing money (including getting a mortgage), taking out a phone contract or even renting an apartment, as well as barring you from ordering anything on credit or paying via invoice.

This is due to the fact that whenever you apply for a loan or credit in Sweden, the lender will check your credit score (kreditupplysning) to see if there is any risk of you not paying up. Many lenders have a strict policy on not lending to individuals with black marks on their credit score to minimise risk, no matter whether the mark is due to an unpaid phone bill or a missed mortgage repayment.

How can I check if I have one?

You can check if you have a black mark by contacting a credit check company – here is a list of all credit check companies in Sweden. Some may charge a small fee for the service, whereas others offer it for free.

One advantage of checking your own credit score before contacting a lender is that your credit score is not affected when you carry out a check on yourself. 

If, however, a bank carries out a credit check on you, this can affect your credit score – it’s usually not an issue if you carry out one or two checks, but a lot of checks in a short period of time could cause issues.

Can you do anything to remove it?

Unfortunately, no. 

All you can do is wait – a black mark will disappear from your record after three years for private individuals or five years for businesses. 

The best strategy is to avoid getting a black mark on your record in the first place – such as by paying your bills via autogiro (direct debit), keeping an eye on your post (as well as your digital post), and paying for items up-front if possible to avoid invoices, rather than using “buy now, pay later” credit services such as Klarna or Clearpay.