Usurers overrun Chinese university campuses
- By Wu Jin
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E-mail China.org.cn, April 26, 2017
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A student in Beijing uses her iPad to search for information. Some students are turning to loans to supplement their lifestyles. [Photo/China Daily] |
Usurers offering loans with easy access but high interest rates are becoming a dominant presence on Chinese university campuses, eating into the meager savings of young students.
Xiao Ming, who has owed debts mounting up to more than 100,000 yuan (US$14,522) since he became a freshman in 2012, is a typical victim.
Short of money and appropriate financial knowledge, he has borrowed money from four different lenders in an attempt to cover his old debts with new loans.
"The root and core of usuries in campuses are the loan sharks taking advantage of young people's desire for consumption and offering loans without any strict credit evaluation, knowing the loans may not be so easy to be paid back," he said.
"My classmate borrowed to buy an iPhone only to find the cost was 2,000 to 3,000 yuan higher than the market price taking into account the extra yearly interest rate, which surpassed 50 percent," Xiao Ming continued.
A spate of individual financial woes, especially one that led to the suicide of a young student in southeastern China's Fujian Province, has aroused immense public concern over loan shark activities on campuses.
Wang Jing, a department director of lending business in an asset management firm in Beijing, said, "The non-performing loan is a taboo area that the financial institutions rarely address. The loan rates to students are high, with about two out of every 10 assumed to be dysfunctional."
Of great concern are overlapping debts owed by students who manage to pay back the original loan by borrowing again, so that the snowballing bad loans have driven up the interest rates to levels borrowers struggle to pay back.
"The game can only proceed in such a way," Wang added. "As long as the lending firm is not the last one to receive the relay baton, it cares nothing beyond how to get the money back."
However, students, immature and inexperienced, should not be blamed alone for this perilous business model.
The lenders, operating under the disguise of supportive financial services and showing their entry-level interest rate as being about 0.99 percent a month, are actually the culprits who purposefully conceal their extra charges that may reach between 10 to 25 percent on an annualized basis, let alone the rate of installment payments which may be even higher due to the operation of compound interest.
According to Wang Jing, students should be cautious when they are planning to place their trust in any firms advertising loans with low rates, as the information is probably incomplete and should arouse immediate skepticism.
Bad performing loans in campuses announced by the lending firms are invariably less than one percent, the Legal Daily has reported. Information on the shady loans is much less complete.
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