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SINGAPORE: Loan applications among young adults in Singapore have surged 140% over the past two years, signaling a growing reliance on debt to manage rising expenses. Individuals under the age of 35, specifically those in Gen Z (20-27 years) and Millennials (28-35 years), now account for nearly half—45%—of all loan applications, according to recent data from loan-matching platform Lendela.

Lendela’s data shows that the average loan amount applied for by young adults over the past two years stands at approximately $13,000, though some loans reach as high as $270,000. This trend points to the scale of financial pressures facing young Singaporeans, with many seeking funds to address immediate expenses, consolidate debts, or cover significant life events.

Among Gen Z borrowers, most applicants come from the low-income bracket, defined as earning under $36,000 per year. In contrast, Millennials tend to occupy the middle-income bracket, earning between $36,000 and $72,000, and make up the majority of loan applicants within this age group.

Lendela told Singapore Business Review (SBR) that this disparity not only reflects natural income differences across generations but may also indicate growing financial pressures on middle-income Millennials.

“Middle-income Millennials are increasingly turning to loans, likely due to elevated cost pressures,” a representative from Lendela rold SBR. Indeed, Millennials with annual incomes over $48,000 have experienced a 23% increase in loan applications over the past two years, highlighting a broader trend of mid- to higher-income Millennials seeking additional financial support.

While both Gen Z and Millennials borrow to consolidate debts and pay bills, their financial priorities reflect distinct life stages. Education and weddings rank high among Gen Z’s borrowing reasons, accounting for 7.5% and 4.9% of loan purposes, respectively. Meanwhile, Millennials are more likely to take out loans for credit card debt (10.1%) and home renovations (6.7%), suggesting that they are further along in establishing households and managing longer-term expenses.

“With the exception of education, weddings, and renovation, the main reasons for young adults’ loans point to the cost of living,” Lendela said, attributing the rise in loan applications to general economic pressures.

There is also a significant portion of Millennials facing large, pre-existing debt burdens. Lendela reported that 16% of Millennials applying for loans have debts exceeding $50,000. A further 46% of Millennials have debts ranging from $30,000 to $50,000, while 17% carry debts between $15,000 and $30,000.

The rise in applications from Millennials with substantial existing debt may signal a lack of credit management skills, according to Lendela.

Meanwhile, Gen Z borrowers are struggling with debt serviceability. The proportion of loan applications from Gen Z applicants with a favorable Total Debt Servicing Ratio (TDSR) has dropped by 16%, while applications with somewhat favorable TDSRs have fallen by 38%. This contrasts with a 37% rise in applications from Gen Z applicants with very unfavorable TDSRs, where their debt obligations exceed 80% of their monthly income.

These trends paint a complex picture of young adults in Singapore facing mounting debt alongside escalating living costs. With more Millennials and Gen Zs relying on loans, Lendela’s data suggests a pressing need for enhanced financial literacy and credit management skills to help young Singaporeans better navigate their financial futures.

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