Chan Jun Hong, 29, spends about MYR3,000 (US$763) each month servicing debts, which account for more than 60% of his salary.
“A good chunk of it goes into paying my personal loans which I had taken about a year or two ago. I took up the loans simply because I was offered, but I ended up splurging recklessly so I regret that decision now,” he told The Star.
He added that a large portion of his debt stems from multiple “Buy Now, Pay Later” services, as well as credit cards used for daily necessities.
“Things got so bad that I eventually turned to a debt consolidation service provider who advised me to take a single massive loan in order to pay off all the various loans at once.”
A person holds up a credit card in Kuala Lumpur, Malaysia. Photo by AFP |
Hong is among many young Malaysians struggling with debts, mostly because of the lack of financial literacy amid the surge of credit services targeting the youth.
Around 40% of Buy Now, Pay Later transactions in the country are made by Malaysians aged 30 or lower, Deputy Finance Minister Liew Chin Tong said last week, adding that the data underscores a concerning trend of younger consumers becoming overly reliant on credit for daily expenses, as reported by Named.
Buy Now, Pay Later refers to financial services that provides consumers with the choice to pay for products either without interest or with a certain percentage of interest. Customers can purchase what they want immediately and pay the bills in the following month.
A survey by the Consumer Credit Oversight Board Task Force involving over 21,000 Buy Now, Pay Later active users in 2024 shows that 69% of users rely entirely on this financial tool as their sole source of financial support.
But reliance on credit purchases for daily expenses come with consequences, as many young Malaysians now have learned.
Nixie (not his real name), 29, said he typically starts the month with no more than MYR1,000 in his bank account, as most of his income goes towards debt repayment.
“I use Buy Now, Pay Later services often due to my tendency to impulsively buy things I don’t need like collectibles, just because they are on sale,” he said.
As a result, Nixie, an electrical engineer, said he is usually only able to make minimum monthly payments of between MYR500 and MYR900 on his credit card debt.
His outstanding balance has hovered at around 90% of its limit for nearly a year, continuing to accrue interest.
“For now, I can still manage things, but the growing credit card interest has me feeling really uneasy about my financial future as I may be stuck paying the debt for years.”
Analysts say that unlike a bank loan where the commitment is clear and documented, the risk of a Buy Now, Pay Later scheme isn’t always obvious at first.
Buy Now, Pay Later users rose from 2.6 million in 2023 to 7.5 million last year, and this trend could pose risks as financial obligations often build up quietly, said Financial Planning Association of Malaysia president Alvin Tan Chin Cherng.
“Although a person with four or five active arrangements across different platforms might find them manageable, such collective repayments can eat up a disproportionate share of one’s monthly take-home pay, and most people genuinely don’t see it coming,” The Star reported.
Tan noted that many young Malaysians remain unaware of their credit scores, and that 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 service, citing its easy-spending design, which for many youths feels less like borrowing and more like delaying payment.
“The approval process is simple, there are minimal checks, and the instalments look small, so it becomes very attractive. From what I see in financial advisory, the issue is not one Buy Now, Pay Later purchase, but when someone starts using multiple platforms at the same time.”
Those small instalments 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, he added.
A 29-year-old customer service worker who wanted to be known as Chan admitted that he had never heard of financial strategies.
Chan said he has difficulty managing his spending habits, which are affecting his financial stability.
“Sometimes I buy things without really thinking about whether I need them. At the end of the month, I realise I had spent more than I should have.”
He added that he is currently juggling his finances while repaying a personal loan taken to settle previous debts.
“It feels like I’m trapped in a financial hole because I’m trying to clear my debts while still managing daily expenses.”
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