SINGAPORE: Social service agencies have recently reported a significant surge in the number of individuals unable to repay their debts, with a startling increase of nearly 50% over the past two years. A third of these cases involve desperate individuals resorting to loan sharks after exhausting all traditional borrowing methods.
Disturbingly, financial analysts note that the age of those grappling with insurmountable debts is steadily decreasing. One 30-year-old man told Channel 8 news that he started borrowing money earlier for family expenses. He used different borrowing methods to repay previous loans, and two years later, he owed more than $80,000 in debt to seven moneylenders.
He said: “After my wife gave birth, there was a period of time when I had to buy milk powder, diapers, everything my daughter needed. It was at this moment that I suddenly realized that I could not continue to be in debt.”
Financial counsellors have observed a concerning trend where individuals, often driven by immediate needs, resort to multiple borrowing methods to repay previous loans, leading to an ever-expanding cycle of debt.
The situation is compounded by the increasing prevalence of buy-now-pay-later instalment payment methods, which impose a 5% interest fee on outstanding amounts for those who miss payments.
Experts in financial counselling stress that the ease of obtaining unsecured loans contributes significantly to the rising debt crisis. While these unsecured loans are typically capped at $2,000, the combination of high interest rates and a sluggish economy threatens to exacerbate the bad debt situation.
Those who have to take pay cuts face an even more dismal situation. Once they can’t pay their previous arrears, they are forced into a never-ending spiral as they would have to pay late payment penalties and interest.
Social service agencies and financial counsellors said they are witnessing a surge in individuals seeking assistance. The average age of these borrowers is becoming notably younger, indicating a critical need for early financial education.
Financial counsellors stress the urgency of strengthening financial education for teenagers to equip them with the necessary skills to manage their finances responsibly, as a lack of financial literacy, coupled with the allure of easily accessible unsecured loans, is contributing to the alarming rise in debt among the younger demographic.
As community leaders grapple with this burgeoning crisis, efforts to enhance financial education and raise awareness about responsible borrowing are crucial steps toward alleviating the burden on individuals and families, preventing them from falling into the clutches of unmanageable debt.