In a shocking trend, young adults in Singapore are turning to loans like never before, with a staggering 140% surge in loan applications over the past two years! This surge signals a troubling dependence on debt to cope with increasing expenses. Alarmingly, individuals aged under 35—comprised mainly of Gen Z (20-27 years) and Millennials (28-35 years)—now account for nearly half (45%) of all loan applications, according to recent insights from the loan-matching platform Lendela.

The average loan amount surged to about $13,000, but some daring individuals are applying for loans that reach as high as $270,000! This financial behavior reflects the intense economic pressures weighing on young Singaporeans. Many are seeking loans to manage immediate costs, consolidate existing debts, or fund critical life events.

Diving deeper into the borrowing habits, it appears that a significant number of Gen Z borrowers hail from low-income backgrounds, characterized by annual earnings under $36,000. Millennials, on the other hand, generally sit within the middle-income range of $36,000 to $72,000 and contribute a considerable portion of loan applications in their demographic.

A representative from Lendela commented, "Middle-income Millennials are increasingly turning to loans, likely due to elevated cost pressures." Indeed, this data reveals that Millennial borrowers with incomes exceeding $48,000 have seen a 23% uptick in loan applications over the last two years, showcasing a broader and concerning trend among those who should be faring better financially.

The motivations behind borrowing differ notably between Gen Z and Millennials. Gen Z utilizes loans primarily for education (7.5%) and weddings (4.9%), points that indicate their focus on growth and life milestones. Meanwhile, Millennials lean towards consolidating credit card debt (10.1%) and home renovation projects (6.7%), reflecting their more established positions in adulthood.

Alarming statistics from Lendela reveal that 16% of Millennials applying for loans have staggering debts exceeding $50,000. An additional 46% carry debts between $30,000 and $50,000, while 17% are burdened with debts from $15,000 to $30,000. These numbers raise concerns about the overall credit management abilities of this generation.

Gen Z borrowers are equally troubled, as the statistics indicate a drop in favorable Total Debt Servicing Ratios (TDSR) among those in this age group. The percentage of Gen Z applicants with a favorable TDSR has decreased by a shocking 16%, whereas those with very unfavorable TDSRs—indicating that their debt obligations exceed 80% of their monthly income—have risen dramatically by 37%.

With both Millennials and Gen Z increasingly resorting to loans to manage their finances, the data from Lendela emphasizes a pressing need for better financial literacy and credit management skills. As these young adults grapple with debt amidst an ever-rising cost of living, it’s clear that finding effective solutions is crucial to ensuring a stable financial future for Singapore’s youth.