Millennials are loading up on personal loans – but Barefoot Investor’s Scott Pape says it might not be the best idea.
New research from Finder shows almost half of millennials have signed up for a personal loan.
Personal finance expert Scott says he isn’t shocked by the findings.
“It doesn’t surprise me. Older people can draw on the equity on their homes, young person don’t have homes typically.”
That proportion is greater than any age cohort – with cars (19%) and holidays (5%) the main reason Generation Y (aged 24 - 38) turn to them.
Only 5% of Millennials have taken out a loan for unforeseen expenses such as medical emergencies, car accidents and household mishaps.
“It’s better than taking out a credit card, but it’s still an unsecured loan so it’s still going to gouge you,” he explains.
The key, he reckons is borrowing less and being reasonable with what you can afford.
“Borrow less. Borrow less than what the bank is willing to lend you, and you’ll be ok.
“You don’t want to be borrowing for things that you don’t need – and ideally you don’t want to be borrowing for things that are going to fall in value. If you can avoid it you should. However I am a realist, you’re you desperately need a car to get to work, you don’t have any choice. But that doesn’t mean that you have to spend $35,000 on a brand new car. Keep it real. “
“If you can avoid taking out a personal loan you should. However, for some people it’s just the reality that you have to. But you always borrow less than the bank will lend you and pay it off as fast as you can.”