Saturday, 15 March 2025
The number of young people aged 18 to 30 who default on their debts has been steadily increasing in recent years, with a particular spike in unpaid short-term loans, according to a survey conducted by the Czech News Agency among debt collection agencies. This trend has resulted in a noticeable drop in the average age of individuals struggling with debt, a decline of one to two years, according to Jana Tatýrková, executive director of the Association of Collection Agencies.
The defaults among younger borrowers often involve short-term loans ranging from tens of thousands of crowns, typically overdue by three or more months, noted Anežka Pavlíková, director of Fincollect. Since 2019, the number of young borrowers in default has risen by 18 percent. However, Pavlíková pointed out that for larger loans, such as consumer loans and mortgages, the profile of clients in default remains predominantly individuals over the age of 35.
Microloans, in particular, have become a significant issue for younger borrowers. Jakub Zetek, chief operating officer of M.B.A. Finance, reported that nearly half of the clients his firm deals with for defaulted microloans are under the age of 30. He noted a troubling pattern among this demographic, where many take out multiple loans in quick succession. “The first loan is often for something necessary, but subsequent loans are used to cover earlier debts, creating a cycle that often ends in insolvency,” Zetek explained. “Unlike their parents, this generation views borrowing and even default as normal and less of a cause for concern.”
Data from Redogan, another debt collection agency, indicates a sharp rise in microcredit defaults among under-30 clients, increasing by almost 10 percent in the last six months. Redogan’s sales director, Radek Pospíšil, highlighted another worrying trend: insolvencies among young borrowers have surged, rising from three to eight percent of the claims handled by the agency over the past year.
Experts attribute this trend to shifting financial behaviors among younger generations. Pavlíková described many millennials and members of Generation Z as driven by a desire for immediate gratification and a consumer lifestyle. “They want the latest phone or computer, go on vacations, or enjoy other experiences without waiting or saving up. Many overestimate their financial capacity and fail to budget for their expenses,” she said.
A survey conducted by GfK last autumn sheds light on the financial challenges faced by Generation Z. The data revealed that 60 percent of individuals from this cohort earn below the national average, and one-third lack savings to cover even a month’s worth of expenses. Additionally, 11 percent of young respondents admitted they were struggling to meet their monthly financial obligations.
The growing tendency of young borrowers to rely on credit for consumer goods and experiences underscores a significant cultural and economic shift. Unlike older generations, who were more inclined to save and adopt conservative financial habits, today’s youth are navigating a world where credit is more accessible but also more dangerous if mismanaged.
Debt collection agencies caution that the rising rate of defaults and insolvencies among younger borrowers is a clear signal of the need for financial education and better budgeting practices. With economic pressures and societal norms increasingly pushing young people toward a debt-reliant lifestyle, the consequences could lead to long-term financial instability for many.
Source: CTK
