Worrying trend: Why do so many Singaporeans have to borrow so much more?

by Leong Sze Hian

A recent report by loan matching platform Lendela, released on 8 August, has revealed a significant increase in loan applications among middle-aged Singaporeans.

Over the past two years, the share of loan applications from individuals aged 40 to 59 has jumped by nearly a third, with the average loan size reaching S$22,000. According to the report, these loans are primarily being taken out to cover living costs and manage debt, including recurring bills, debt consolidation, and credit card payments.

More concerning is the profile of the borrowers. It isn’t just those on the financial edge who are seeking loans; middle- and high-income earners are also increasingly turning to borrowing.

Specifically, there was a 35 per cent rise in loan applications from middle-income Singaporeans earning between S$48,000 and S$84,000 annually, and a striking 64 per cent increase among those earning above S$84,000 a year.

Moreover, the size of these loans is not insignificant. A fifth of all cost-of-living loan applications exceed S$20,000, and the share of borrowers with existing debts has increased by 25 per cent from June 2022 to June 2024. Those carrying large debts over S$50,000 have seen a 56 per cent rise.

Even retirees have not been spared from this borrowing trend, with a 50 per cent jump in loan applications from those over 60 years old since 2022, even though they represent only 3 per cent of total applications.

These statistics seem to prompt several questions regarding the current state of financial well-being in Singapore. If incomes are indeed as strong as the government claims, why are so many middle-aged Singaporeans—including those earning above the median wage—resorting to loans just to manage their daily expenses? Could this suggest that the cost-of-living pressures are more intense and widespread than is commonly acknowledged?

The government has often assured the public that Singapore's social welfare policies are sufficient to meet the population's needs. But if this is the case, why are even middle- and high-income earners, who are presumably more financially secure, increasingly relying on loans? Could this be an indication that the social safety nets may not be as robust as they are portrayed?

The report also raises concerns about the adequacy of retirement provisions. Why are retirees, who should ideally be living off their savings and retirement funds, turning to loans? Does this suggest that the current retirement system may not be providing enough security for our elderly population?

These questions point to the need for a closer examination of the government's approach to addressing financial insecurity and the rising cost of living. Could it be time for a re-evaluation of the policies in place, to ensure they truly meet the needs of all Singaporeans? The growing reliance on loans, even among those who should be financially stable, might indicate that more needs to be done to align policy with the realities faced by the population.

Ultimately, these trends raise important questions that warrant thoughtful consideration. As Singaporeans continue to grapple with financial pressures, it is crucial that these issues are addressed in a way that genuinely reflects and responds to the needs of the people.