Young adults face rising debt in Singapore
A recent report reveals a troubling trend: middle-class young adults in Singapore are increasingly burdened by debt.
According to loan matching platform Lendela, loan applications from those aged 20 to 35 have surged, with young adults now accounting for nearly half of all loan requests, as the cost of living continues to rise.
The average loan size sought by this group has also climbed, reflecting growing financial pressures tied to essential living expenses.
The study indicates a 140 per cent increase in loan applications from young adults over the past two years, although their overall share of applications has decreased by 20 per cent.
Young adults now apply for an average loan of $13,000, with amounts reaching as high as $270,000.
The primary reasons for borrowing include debt consolidation (31.8 per cent), bills (19.3 per cent), and home-related expenses (6.7 per cent), underscoring the urgent financial challenges faced by this demographic.
Millennials, particularly those in the middle-income bracket, have seen a notable rise in loan applications, often linked to significant life expenses such as mortgages, family care, and education costs.
Over 30 per cent of applications from millennials earning more than $84,000 reflect the increasing financial strain they encounter.
This trend is exacerbated for Gen Z borrowers, whose favourable debt serviceability ratios have declined, indicating greater difficulties in managing existing debts.
The report highlights a critical need for financial literacy and support, as more young adults turn to loans to cope with their economic realities.
Bryan Tay, Lendela's Singapore country manager, emphasises the importance of maintaining a healthy credit profile to navigate these pressures.
“While credit options need to remain accessible in a high-cost environment and to young adults who need them, it’s incredibly important for the long term financial health of younger borrowers that they maintain a healthy credit profile,” Tay said.
“This involves paying on time and in full, as well as how many debt and credit facilities they have, on top of several other indicators, and can significantly influence the financing options available to them, as well as the associated costs,” he added.
As discussions around the cost of living persist in Singapore's public discourse, the data serves as a stark reminder of the financial challenges affecting the nation’s younger generations.
With the economic landscape evolving, understanding the borrowing behaviours and financial health of young adults becomes increasingly essential for policymakers and financial institutions alike. Addressing these issues may be key to fostering long-term financial stability for Singapore's middle-class youth.
(Note: All figures quoted in the report are for share of applications, not total volume of applications, unless otherwise stated.)
Read on how the rising cost of living hits young Singaporeans hard here.