Three in four Malaysian youngsters are in debt, possible fallout of inflation and pandemic

Three in four Malaysian youngsters are in debt, possible fallout of inflation and pandemic

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Financial constraints (42%), inflation (22%), and maintaining a luxurious lifestyle (21%) are the main reasons youth are taking loans.

Of the 1,077 Malaysian youngsters (aged 18-40 years) surveyed for a new report, close to three in four (73%) admit to currently being in debt. The three reasons most often cited for taking up loans were: financial constraint (42%), inflation (22%), and wanting to maintain a luxurious lifestyle (21%).

Conducted by UCSI Poll Research Centre, the findings alarmingly indicate that a majority of Malaysian youth do not have sufficient capital for financial commitments. Despite the high number of borrowers though, 83% of them said they were able to pay their loan (repayments) on time.

So what is the money being used for? Vehicle loans top the list as the most popular type of loan taken (30% of respondents), while 28% were education loans and 16% were home loans.

The report explained: "It is alarming to have vehicle loans on top of the pyramid as according to the Insolvency Department Malaysia, vehicle loans (14.39%) has been the second causal factor of bankruptcy rate after personal loan (42.24%) in the year 2022."

Thankfully, 73% of the survey respondents said they were aware of the implication of loan defaulting.

malaysian youth loan purpose

What are the reasons for indebtedness?

Overall, the growth in the cost of living and insufficient savings (27%) were cited as the primary causes of financial constraints faced by youth, while a change in lifestyle was the third primary cause of financial constraint.

As stated in the report: "The change in lifestyle may have been necessary to some of the youngsters because a lot of things has changed during the pandemic. One of the examples are university students; the transition from physical classes to online classes requires each student to have their own laptop and home Wi-Fi for them to join online classes which indirectly affected their daily financial wellbeing."

In fact, 58% of the respondents did say that their financial status has been impacted as an effect of COVID-19. This pandemic impact, according to the data, could be in the form of unemployment, unstable income and the increase in commitments. 

Dr Hassanudin bin Mohd Thas Thaker, Head of Research and Postgraduate Studies, Faculty of Business and Management, UCSI University, noted: "Based on the outcome of this research, it could be concluded that majority of the youngsters are having greater financial constraints due to the COVID-19 strikes. With the current financial crisis period, inflation has also contributed to the number of borrowers among youngsters in Malaysia." 

malaysia youth financial constraints

Lead image / Shutterstock
In-line images / UCSI

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