KUALA LUMPUR: The growing availability of quick digital loans through e-commerce and money-lending platforms is offering consumers easier access to credit, but financial planners warn that repeated borrowing could lead to mounting debt and financial difficulties.
With loan applications ranging from as little as RM100 to more than RM100,000, these facilities can provide short-term relief for consumers facing cash-flow constraints. However, experts caution that they should not become a regular source of financing for daily expenses or lifestyle spending.
Certified financial planner Jarvic Lau told The Star that digital borrowing could help address temporary financial shortfalls but would not resolve persistent problems arising from insufficient income.
He advised consumers to assess their disposable income after essential expenses and existing debt repayments to determine whether they could afford additional commitments without taking further loans.
Lau also warned that repayments across multiple lending platforms could accumulate quickly, even when individual instalments appeared manageable.
He urged borrowers to compare the actual amount received with the total repayment obligation, including fees and other charges, before accepting a loan.
Those experiencing repayment difficulties should avoid taking on additional debt for discretionary purchases and engage lenders early to discuss repayment arrangements. They could also seek financial counselling from the Credit Counselling and Debt Management Agency.
Lau called for affordability assessments to take into account borrowers' income, essential expenses and existing financial commitments across different platforms. Lenders should also review customers who repeatedly apply for loans or show signs of repayment stress.
Meanwhile, licensed financial planner and Areca Capital chief executive officer Danny Wong said the speed and convenience of digital lending made it particularly attractive to younger consumers.
However, he cautioned that multiple instalment commitments could become burdensome, even if each individual repayment appeared affordable.
He said consumers could also be encouraged to spend beyond their means when purchases were divided into smaller payments, while some might mistakenly assume interest-free instalments carried no additional costs.
Wong called for stronger safeguards, including more thorough income and debt checks, limits on excessive borrowing and clearer disclosure of interest rates, fees and other charges.
He said digital lending should not be prohibited outright, as responsible lending could improve financial inclusion.
"The main goal should not be to stop people from borrowing, but to prevent them from falling into a debt trap," he said.