DNA Edit: Prepaid India -A whole generation is thriving on personal loans

Financial planning is the forte of millennials, so they say. Well, if this planning includes splurging with loans, then it is, indeed, a sign of changing times. In a testament to the consumerist ethos, millennials seem to be making hay on loans they don’t repay!

Loans are no longer your unwieldy, once-in-a-lifetime project for owning an apartment or buying a car. New job entrants are sourcing loans from banks and non-banking financial companies (NBFCs) to pay for the oddest objectives possible: a big party, designer wear, the latest tech toy or a pricey holiday abroad.

Young graduates (22-26 years) entering the workforce are lured by banks and NBFCs to take multiple personal loans, and they begin to default when they are unable to manage the paybacks. Delinquencies on personal loans have risen by 70% in December 2018 to Rs 36,723 crore in May 2019, while those on consumer loans have risen by 8.3% to Rs 5,280 crore. Data with CreditMate, a technology platform for collection of bad debt, makes for interesting reading.

A six-month-old project, CreditMate has sourced over Rs 500 crore of loans requiring collection, which includes personal, consumer durable and micro loans. It works with over 150 recovery agencies to help banks and NBFCs recover dues to the small borrowers and to educate the young borrowers through its technology platform.

It is no surprise, therefore, that a report from top US-based bank and stock brokerage, Charles Schwab, points out that millennials spend more than other generations on comforts and conveniences. That’s why when it comes to saving money, a lot of them are broke.

A majority of young people have less than $1,000 (~Rs 70,000) in their savings accounts, and a significant number have nothing at all, says Schwab. Clearly, their spending habits could explain their lack of savings.