More young Malaysians are finding themselves caught in the cycle of debt as the burden of financial obligations – largely from credit card loans – weighs heavy on their incomes. Among them is 29-year-old Chan Jun Hong, who spends almost MYR3,000 (US$763) each month to service his debts, accounting for over 60% of his salary.
Chan Jun Hong shares that a significant portion of his income is allocated to repay personal loans he took out a year or two ago. It was a decision made out of convenience, as he was offered the loans, and used them to spend recklessly. Today, he regrets this decision. He also admits to having a sizable amount of debt from the use of “Buy Now, Pay Later” services and credit cards for everyday necessities. His situation deteriorated to the point where he sought help from a debt consolidation service provider, who advised him to take a single extensive loan to pay off all his various debts simultaneously.
His predicament is not unique. Many young Malaysians are grappling with debts, primarily due to a lack of financial literacy in the face of a surge of credit services targeted at the youth. In Malaysia, about 40% of “Buy Now, Pay Later” transactions are made by those aged 30 and below. This statistic highlights an alarming trend of younger consumers becoming overly dependent on credit for daily expenses.
“Buy Now, Pay Later” is a financial service that allows consumers to purchase products either interest-free or with a certain percentage of interest, with payment due the following month. A survey involving over 21,000 active “Buy Now, Pay Later” users in 2024 revealed that 69% of users solely depend on this financial tool for their financial support.
However, this reliance on credit purchases for daily needs has consequences, which many young Malaysians are now realizing. One 29-year-old, using the pseudonym Nixie, revealed that he typically starts the month with no more than MYR1,000 in his bank account, as most of his income goes towards debt repayment. Nixie often resorts to “Buy Now, Pay Later” services due to his tendency to make impulsive purchases of non-essential items, such as collectibles, when they are on sale.
As an electrical engineer, Nixie can only afford to make minimum monthly payments of between MYR500 and MYR900 on his credit card debt. His outstanding balance has remained at around 90% of its limit for nearly a year, accruing more interest. Nixie shares his growing unease about his financial future, fearing he may be stuck paying the debt for years due to the increasing credit card interest.
Financial analysts point out that while bank loans come with clearly documented commitments, the risks of a “Buy Now, Pay Later” scheme aren’t always apparent at the start.
The number of “Buy Now, Pay Later” users rose from 2.6 million in 2023 to 7.5 million last year. This trend could be risky as financial obligations can often accumulate quietly. Alvin Tan Chin Cherng, Financial Planning Association of Malaysia president, mentioned that such collective repayments could consume a disproportionate share of one’s monthly income, and most people don’t see it coming.
Many young Malaysians remain ignorant of their credit scores, and missed or late “Buy Now, Pay Later” payments could affect a person’s ability to secure a housing loan or car financing in the future.
Financial planner Gunaseelan Kannan also expressed concern over the rise of these services, citing its easy-spending design, which for many youths feels less like borrowing and more like delaying payment.
The simple approval process, minimal checks, and the seemingly small installments make it very attractive. However, those small installments can quickly add up and affect monthly cash flow. Many young people are still building their financial habits, so without proper budgeting or financial literacy, it can slowly turn into a debt cycle.
A 29-year-old customer service worker known as Chan admitted that he had never heard of financial strategies. He struggles to manage his spending habits which are affecting his financial stability. He is now juggling his finances while repaying a personal loan taken to settle previous debts.
What are the causes of the increasing debt among young Malaysians?
The rise in debt among young Malaysians is mainly attributed to the ease of access to credit services, particularly “Buy Now, Pay Later” schemes, and a lack of financial literacy.
What are the consequences of the growing reliance on “Buy Now, Pay Later” services?
The consequences include the accumulation of debts that can consume a significant proportion of one’s income, causing financial instability. Missed or late payments can also negatively impact credit scores, which could affect a person’s ability to secure future loans.
What is the solution to this growing problem?
Better financial education is one solution to tackle this issue. Young people need to understand the importance of budgeting, managing their spending habits, and the implications of credit scores. It’s also important to consider the regulation of credit services to ensure they don’t exploit the lack of financial literacy among young people.
