Another key reason for youth borrowing more is the availability of buy now, pay later service providers, which have become popular in recent years.
“A lot of (people) are also sold on the idea of a buy now, pay later model. It (seems) embedded into society – through social media – that it is okay to borrow debt to sustain the lifestyle that you want to have,” said Ms Lee.
Ms Joey Tan, centre manager of Arise2care Community Service, said that many are attracted to such unsecured loans as they are easy to access and do not require a good credit score.
These instalment plans are typically interest-free. However, miss a payment, and consumers could get charged up to 5 per cent interest on the outstanding amount.
“(For these providers), they don’t really need to provide a lot of details to take on a loan and the loan tenor is also getting longer. A lot of our clients use these facilities to the maximum and to their limit before they come to us,” she said.
To avoid over-leverage, such service providers have guidelines such as users can only have a maximum of S$2,000 in outstanding payments.
NEED FOR FINANCIAL EDUCATION
However, agencies said that is not enough to solve the problem.
High interest rates and a slowing economic outlook ahead could make bad debts worse.
They pointed to a need to beef up financial education for youths.
“Financial education for the younger ones needs to be more engaging and suited to their level,” said Ms Tan. “They should have an idea of what to do with their money once they start earning. Expenditure planning is so important.”
To raise awareness on savings, insurance, and investment needs, the Monetary Authority of Singapore (MAS) launched a basic financial planning guide last month.
Social services agencies are also encouraging those who fall into debt to speak out and seek help.
“Often when you are stressed, you do not make good financial decisions,” said Ms Lee.
“So it’s good to speak to people who specialise in it, so that they can help you, (such as) third parties like us. The earlier you seek help about your debt situation, the faster and easier it can be resolved.”