There are many reasons why people are turning more towards loans at a younger age nowadays. At some point in our lives, there will be certain points where we are short of money. So, in these situations, we will probably seek financial advice and even try applying for loans.
According to Finder.Com, the average age for people to be taking out a payday loan is between 25 and 30 years old. In this case, it is typically due to factors like living expenses or car repairs. But, why is it more common now?
Rising Costs of Essentials
The issue with rising costs is something which increases every year. Especially now during the COVID-19 pandemic, the costs of everyday essentials have risen by over 4.4%. Products in higher demand are rising by even a larger amount. For example, the price of rice rose by 8.4%. This is just one example of the rising prices in the industry. Therefore, for the young adults who may have just left university or bought their first house, the rising prices are likely to affect them. This leads to them applying for loans.
As well as that, in April of 2020, the national living wage increased by 6.7%. It has resulted in an annual rise of £930. This will also impact those who may have just splurged on things like a new home.
So, these rising costs in day to day life are impacting people’s lives negatively. Leading to some people turning to payday or short term loans to help them out with essential finances.
Lower Incomes
According to the Office for National Statistics, 3.9% of the UK is unemployed (16 and over). Although that percentage seems very low, this equates to a large number of individuals. Along with this, the Low Pay Commission estimates that there were 2 million workers paid at or below the national minimum wage in April 2019. This equates to around 7% of all UK workers. So, those with lower incomes may be struggling with bills or other finances due to their income. This is where loans come in helpful, whether it be a payday loan to cover a specific bill or even short term loan which lasts a little bit longer. For more information click here.
Consequences
Due to the rising costs of living and the rise in essentials, more and more young people are falling into debt. Reports have found that credit cards, overdrafts, and loans all feature strongly the borrowing habits of those aged between 19 and 24 years old.
Here at LoanPig, we advise that you only borrow money for essentials and emergencies. This way, you are less likely to fall into the cycle of debt. There are plenty of other ways to afford essentials in the future. For example, using different saving methods or getting help from family and friends. For advice on keeping out of debt or even resetting debt, click here.