Many individuals find themselves trapped in debt stemming from online loan applications. Typically, they resort to borrowing from multiple online platforms to cover overdue loan bills.
When pursued by debt collectors, borrowers often feel besieged, with the burden of debt amounts even extending to their social circles. It’s not uncommon for borrowers to grapple with feelings of shame and depression and, in extreme cases, contemplate drastic measures like suicide.
Dr. I Wayan Nuka Lantara, a lecturer in the Department of Management at the UGM Faculty of Economics and Business, said that while online loan providers levy relatively high-interest rates, the allure of ease and convenience in the borrowing process continues to attract a growing number of borrowers over time, especially when traditional bank loans are unattainable due to incongruent financial profiles.
“Borrowers who banks may have turned down opt for online loans due to their expedited and practical nature. Ultimately, it boils down to acquiring the funds,” Dr. Lantara remarked on Friday (Feb. 23) during the Sekolah Wartawan program at the UGM Central Building.
Drawing from his analysis, borrowing from fintech companies peaks in July and August, coinciding with school and college registration periods, while witnessing a decline in April.
“We observe a surge in borrowers during July and August, with April registering the lowest figures,” he noted.
Dr. Lantara disclosed that approximately Rp20 trillion circulates through online loans, with only about 3-4 percent resulting in defaults.
“Roughly 3-4 percent of loans face hitches. Typically, defaulters fall within the 19-34 age bracket, considered less financially productive, with a tendency toward consumptive spending,” he expounded.
According to Dr. Lantara, default cases predominantly arise from online loans intended for consumptive purposes. Various online loan types cater to different needs, such as education, cash advances or pay-later schemes, consumption-based loans, and business support loans.
Dr. Lantara offers counsel on selecting online loans, emphasizing the importance of determining the purpose of borrowing upfront, whether to address needs or wants.
Additionally, he underscores the necessity of meticulously reading and comprehending the loan agreement contract. Post-disbursement, it’s imperative to honor financial obligations promptly and accurately to evade penalties.
“Equally vital is verifying that the online loan provider is registered with the Indonesian FSA (OJK), given that as of January 2022, 104 online loan providers are registered with the OJK,” he emphasized.
Furthermore, borrowers should scrutinize the loan interest rates, acquaint themselves with the online loan company’s reputation, and evaluate the caliber of their customer service.
Dr. Lantara contends that as long as online loans are channeled toward productive ventures and yield tangible outcomes, they pose no issue. However, when utilized for consumptive purposes, they carry financial hazards.
“Consumption should be moderated to enable savings. Those who can save are those who can rein in their impulses,” the lecturer concluded.
Author: Gusti Grehenson
Photographer: Donnie