The Lure of Easy Borrowing and Its Impact on Millennials

In the digital age, accessing financial services has become more convenient than ever, but this ease of borrowing could be leading to a growing debt trap among millennials. This article explores the factors contributing to this phenomenon, with a focus on credit cards, loans, and the MUDRA scheme, and highlights the importance of financial literacy to avoid such pitfalls.

Introduction to Ease of Borrowing

The convenience and accessibility of borrowing have been a double-edged sword, especially for millennials. Many are drawn to the glamour and convenience of using credit cards, often for unnecessary purchases that do not align with their financial goals. Additionally, it is reported that loans are now more readily available, which may contribute to an overreliance on easy financing.

Historical Context and Changing Attitudes

Traditionally, older generations had a more conservative approach to borrowing, considering loans a last resort. However, younger generations have been influenced by marketing and the allure of instant gratification. For instance, it was once considered irresponsible to pawn one's gold, but today, it has become fashionable to get a gold loan.

Such changes have been driven by marketing strategies that redefine what is considered desirable and acceptable in society. Companies have rebranded the traditional concept of borrowing to make it seem more accessible and less risky.

The Growing Debt Trap Among Millennials

The ease of borrowing, while convenient, can lead to a spiraling debt trap. Young adults are now more likely to embrace short-term financial solutions, such as LazyPay for daily expenses, without fully considering the long-term consequences. A simple scenario, ordering food through an app and deferring payment to a later date, can introduce individuals to the concept of borrowing and make them more comfortable with it.

This trend is particularly concerning for the millennial generation, who often lack the financial experience and wisdom to navigate these options responsibly. The MUDRA scheme, intended to assist young entrepreneurs, has seen a concerning NPA (Non-Performing Assets) rate, with outstanding debts totalling 7200 crores. Although some millennials benefit from these schemes, many misuse them for personal rather than business purposes, leading to significant financial strain.

Understanding and Avoiding Easy Financing Traps

To avoid falling into the debt trap, it is crucial to understand the importance of financial literacy. Here are steps that can help:

Set Clear Financial Goals: Define your financial objectives and prioritize them. This will help you make informed decisions about borrowing and spending. Evaluate Your Risk Appetite: Assess how much risk you are willing to take with your finances, and align it with your investment or borrowing choices. Choose the Right Investment Portfolio: Based on your goals and risk appetite, select the appropriate mix of investments to achieve your financial targets. Read and Understand Documents: Before making any significant financial moves, thoroughly read and understand all related documents, such as loan agreements and investment agreements. Seek Professional Advice: Consult a certified financial planner for personalized advice and to ensure that you make informed and responsible financial decisions.

Conclusion

The ease of borrowing is a reality of modern finance, but it comes with significant risks, particularly for the millennial generation. By fostering financial literacy, setting clear goals, and making informed decisions, individuals can avoid the debt trap and contribute positively to the economy. It is incumbent upon both millennials and the financial service providers to act responsibly to ensure a sustainable and stable financial future.