Too much debts! Ticking time bomb for Malaysia.

Too much debts! Ticking time bomb for Malaysia.

It’s important to note that even if we are able to pay our home loans on time, our car loans on time, our Buy Now Pay Later on time, it may not be true for everyone else. Some may struggle to pay home loans on time, car loans on time and some pay just one time for their BNPL scheme. The reason? They already have many other BNPLs which they were also paying before they signed up for this latest one.

Whether it’s due to Fear of Missing Out (FOMO) or You Only Live Once (YOLO), many are not well versed enough when it comes to financial sense. That’s why it’s good to read kopiandproperty.com daily. Be financially savvy, read kopiandproperty. It rhymes even. Okay, now for the sobering piece of news.

Article in nst.com.my. Debt among the younger generation is seen as a ticking time bomb for the country’s economy.

Bachok member of parliament Mohd Syahir Che Sulaiman said that based on data from the Credit Counselling and Debt Management Agency, 53,000 individuals under age of 30 are facing a staggering total debt of RM1.9 billion.

He said the increasing accessibility of personal loans, credit cards, and particularly Buy Now Pay Later (BNPL) schemes is raising alarms, especially among the younger generation.

“According to the latest report from the Consumer Credit Oversight Board, the value of BNPL debt has now reached RM1.42 billion, with the majority of the 3.7 million BNPL account holders aged between 21 and 45. Article in nst.com.my.

RM1.9 billion for 53,000 means an average debt of RM35,849 per person!

This is crazy high if you ask me yeah. If someone were to pay RM500 per month and stop taking on more debts, then this person will need 72 months to fully repay the current debt of RM35,849. 72 months means 6 years of continuous month by month payment and no new debts. If someone is 35 now, by the time they finish paying the debt, they would be 41 years old. It’s not easy to escape once the debt is accumulated and the interest on them grows faster than one could repay them.

Dangerous to the economy when bad debts are high

If 53,000 people suddenly defaulted, this brings huge implications. Hopefully these 53,000 people are spread across all the banks, so the effect to each bank is lower. I cannot imagine one particular bank having 53,000 of its customers defaulting at the same time. This one particular bank will suddenly have to reassess its loans and may have to stop lending for a while as it assess what went wrong. An amount of RM1.9 billion is actually bigger than the yearly profit for some banks here in Malaysia.

BNPL could be a debt hole, please take care

BNPL is very easy. We like the item, we buy and then we put it on BNPL. We thought we could but once we do this a few more times, suddenly the number becomes too big for comfort. Before we buy, do we know what’s the total BNPL amount we have to pay moving forward? If we are buying something to make us look good, then overspending will just make us look bad in the future. Take care.

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