More and more young people are falling deep into debt and it is about time we got worried about it. Many teenagers and young people below 25 are finding themselves struggling to make debt payments and cover costs of living because of the huge loans they got themselves enveloped in.
According to a report by Citizens Advice, in every 10 young people, 62% (or 6) are servicing high interest loans such as the payday loan. The charity went on to say about 15% of individuals with damaging debt cases are aged between 17 and 24 years. This figure would not have been so scary if the report did not go on to state that only 8% of that group was in debt because of more common bank loan or credit card debt.
The young people are partly responsible
No loan company worth its salt will offer a loan to a minor (below 18 years), because it will be impossible to enforce the repayment of the loan legally. Many loan providers would require proof of age, UK residency and evidence of good conduct from an applicant.
In Sainsbury’s, Barclays, HSBC, Halifax, Clydesdale Bank or Tesco Bank, the applicant must be 18 and above before consideration. Santander takes it a step further and demands that applicants must be over 21 and have a paid income of £5,000 per annum before applying. Post Office does the same, but demands an annual income of £8,000.
When it comes to credit cards, Tesco Bank requires the individual have an annual income of £5,000 and be over 18 years. Halifax requires the holder be over 18, but does not state a minimum amount for annual income. Lloyds Bank however, requires the bearer of the card be over 18, a UK resident and free of any county court judgements, but it does not require a minimum yearly income.
Young people need to consider better options for loans
Borrowing money can be beneficial if you are in a tight spot and need a quick buck. According to an article in theguardian.com young people below 25 are more likely to borrow from a payday loan service than go to the bank or a cooperative. It is possible that the new, hip nature of payday loan services like Wonga are more attractive to young people over the conventional credit cards and personal loans.
Creditpoor offers payday loans with no credit checks that may be useful to some. It is also possible that a lot of them do not understand the basics of conventional loan management techniques. Whatever the reason is, payday loans offer a higher percentage and far more debilitating effect on the finances of young people than the conventional credit sources.
According to the CEO of Citizen Advice, millennials (AKA Generation Y) is quickly becoming Generation Credit. The loans they take today will have major effects not only on them, but on the world as they grow older.
In many of the cases however, the individual has lied about their age and gone on to receive the loan (usually online).