It seems that cars are one of the main culprits for youths being in debt in Malaysia.
Debts can be a heavy burden for youths. When young people are in debt, it can impact their ability to make future financial decisions, limit their financial freedom, and cause stress and anxiety.
For this exact reason, we always hope that youths never get themselves into debt, but a recent finding from local University UCSI tells a worrying tale about youths in Malaysia.
UCSI has found that 73% of 1,077 Malaysians aged between 18 and 40 are in debt. According to them, the main reasons given for taking loans were financial constraint (42%), inflation (22%) and luxurious lifestyle (21%).
According to the report in Malay Mail, “this indicates that about three-quarters of Malaysian youths do not have sufficient capital for financial commitments.”
“Although the number of borrowers among the youngsters is worrying, 83% of them could pay their loans on time,” said UCSI University’s head of research and postgraduate studies in its Faculty of Business and Management, Hassanudin Mohd Thas Thaker.
What’s even more worrying is that youths are burdening themselves just for the sake of a vehicle, which according to the University, is one of the top causes. The survey found that 30% of the loans were for vehicles, 28% were for education, and 16% were for buying houses.
“It is alarming to have vehicle loans on top of the pyramid as according to the Insolvency Department Malaysia, vehicle loans (14.39%) have been the second causal factor of bankruptcy rate after personal loans (42.24%) in the year 2022,” said Hassanuddin.
And it’s not like they don’t know the consequences of defaulting the loans because 73% of them know what will happen if they don’t pay up. Hassanuddin added that this shows Malaysian youths do not apply for loans blindly.
But Hassanuddin has given them a hall pass as he believes that one of the reasons that youths are in debt is due to COVID-19. Change in lifestyle may have been necessary to some of the youths because many things changed during the pandemic.
“One of the examples are university students’ transition from physical classes to online classes.”
“This requires each student to have their own laptop and home Wi-Fi facility for them to join online classes, which indirectly affected their daily financial well-being,” he said.
Another finding is that most youths are in debt as they do not have enough savings to begin a new chapter of their life which later causes them to apply for loans.
“Based on the outcome of this research, it could be concluded that the majority of the youths are having greater financial constraints due to the Covid-19 waves,” he said.