My Take

Are loan commercials dragging young people into a morass of debt?

TV ads offering instant loans could be drawing young people into debts they can’t repay

PUBLISHED : Wednesday, 14 September, 2016, 12:04am
UPDATED : Wednesday, 14 September, 2016, 12:04am

I used to think those personal loan commercials on television exaggerated the financial mindlessness of today’s young people. But having seen how quickly the latest Apple iPhones were sold out, those commercials may be more realistic than TVB soap operas.

Every night on prime time television, you have commercials offering loans without documentary proof or face time in an office. One features a couple having a grand time at a K-pop concert. They follow the pop group on an Asian tour of major cities and realise they are running out of money to pay for more plane tickets.

No worries, the boyfriend says, the money is just a phone call away.

Why Hong Kong’s youth can no longer expect to be richer than their parents

In another advert, the woman asks why her boyfriend or husband is taking so much better photos lately. That’s because he has upgraded his photographic equipment. But that must cost a lot of money, she says. Well, he replies, he can easily get a loan to pay for it.

Credit card companies apply double-digit interest charges from the day you miss your deadline payment. You can just imagine how much those legalised loan sharks – sorry, personal loan companies – charge. Compound interest works for you if you invest wisely just as it can snowball into mounting debts if you borrow unwisely.

According to the Monetary Authority, private consumption has been growing faster than incomes, which have been stagnant.

These scary thoughts crossed my mind after reading how all the iPhone 7 Plus models were sold in less than 10 minutes after Apple started pre-ordering last Friday. The jet-black ones have been the most popular. The latest model with 128 gigabyte capacity starts at HK$7,388.

Bet on black: the iPhone 7 delivers the goods under the hood

Sold in the secondary market, you can add another HK$3,000 to the price tag, according to some retailers. That must be half a month’s salary or more for many young workers, who probably already have decent smartphones.

So where do they get the money? Some live with their parents and so don’t pay rent. Some borrow from their parents and never have to pay back.

Still there must be a fair number of young people who are borrowing in the way depicted in those TV commercials. Considering wages have been stagnant, how are they ever going to work off their debts?

If they outlaw cigarette ads, maybe they should do the same with loan commercials.