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Click. Borrow: How digital loans can derail your financial future

Case study based on story from media resources

Developed by the Kauno rajono švietimo centras (Lithuania)


The following case study is based on information sourced from a Lithuanian news portal ( Please note that the details shared are based on the latest media reports available at this time and are subject to change as new information emerges. The case aims to inform people in order to increase their knowledge and understanding about the potential pitfalls of irresponsible digital borrowing. The purpose is to highlight that the case is not just to instruct but also to influence behavior by increasing awareness about online loan options, the risks of fast digital loans, emphasizing how a poor credit score can hinder individual‘s ability to secure larger loans like mortgages in the future.

Case analysis

Tom (32 years old) had made a modest living as a construction worker in a quiet town of the rural Lithuania. His days were filled with hard labour, but his earnings were often not enough to stretch through the month. Like many in his village, Tom found himself isolated from traditional banking services – there were no bank branches within easy reach, and his lack of a formal credit history made the situation more complicated. Desperate to meet his daily needs and occasional emergencies, Tom turned to readily available short-term digital loans that required no credit check. Easy applications, instant approvals, the promise of quick cash – it felt like a magic solution. However, Tom’s approach to these loans was far from cautious. He borrowed frequently and spent the money on non-essential items, failing to consider the increasing debt and steep interest rates. But the cycle was addictive. He’d pay back one loan, only to find himself needing another to cover the next unexpected expense. As time passed, Tom met Lina, a school teacher, whose influence gradually changed his outlook on life. Soon they decided to marry. Dreaming of a better future, they moved to Vilnius, the largest city of Lithuania, seeking new opportunities away from the limitations of rural life. In the city, Lina continued teaching while Tom secured a more stable job in a large construction firm. Motivated by a desire to establish a secure home, Tom and Lina began planning to buy an apartment. However, their dreams were soon challenged when they applied for a mortgage. Despite his steady job, the bank conducted a thorough evaluation of Tom’s financial background. His previous irresponsible digital borrowing habits came to light, showing a trail of unpaid short-term loans and a damaged credit score. The bank’s refusal to grant a mortgage was a cold splash of reality. Tom and Lina took decisive steps to correct his financial situation. He approached a financial advisor recommended by the bank, who helped them understand the importance of creditworthiness and effective debt management. Together, they developed a plan, including strict budgeting, credit building, listing all their expenses and income. Over the next few years, Tom‘s credit score gradually improved, and he and Lina were able to save enough for a substantial down payment on their apartment. When they applied for a mortgage again, the bank reviewed the couple‘s vastly improved credit history, responsible money management and approved their loan.

Proposed solutions and recommendations

Digital financial literacy is a combination of knowledge, skills, attitudes and behaviors necessary for individuals to be aware of and safely use digital financial services and digital technologies. OECD/INFE 2023 International Survey of Adult Financial Literacy demonstrates that among many adults the understanding basic borrowing skills may not be sufficient. The evidence presented in this report reveal potential risks and dangers that digital borrowers should be aware of:
  • Digital loans, especially those processed quickly and with minimal requirements, can carry higher interest rates than traditional bank loans.
  • Fast digital loans often have shorter repayment periods, which can put pressure on borrowers to pay back the money quickly.
  • Some digital loans may include hidden fees or complex terms that are not fully transparent.
  • The speed of obtaining digital loans can lead to impulse borrowing, where individuals make quick financial decisions without fully considering their ability to repay or the necessity of the loan.
  • Fast borrowing can lead to a poor creditworthiness of an individual that is expressed by a credit score that can impact various aspects of an individual‘s financial life in the future.
  • Some digital lending platforms may engage in irresponsible lending practices, targeting vulnerable borrowers with poor credit histories and offering loans that are difficult to repay.
  • Digital lending is a relatively new field and may not be as heavily regulated as traditional banking thus leaving borrowers with fewer protections.
Based on OECD Recommendation on Financial Literacy, a series of policy suggestions have been identified in terms of digital borrowing:
  • Knowing how to navigate online banking platforms and budgeting apps can empower individuals to manage their finances effectively.
  • Knowing the difference between various loan options allows for secure financial decisions and responsible financial habits.
  • To promote responsible financial habits the bank of Lithuania provides guidance and recommendations to ensure customers make informed decisions and understand the terms and conditions of their digital loans. Here are some common recommendations regarding responsible borrowing:
  • The bank emphasizes the importance of reading and understanding the digital borrowing terms, including the interest rate, repayment schedule, fees, and penalties for late payments.
  • The bank recommends that borrowers assess their financial needs accurately to avoid borrowing more than necessary.
  • The bank provides online loan calculators. These tools can help borrowers understand how much they need to repay monthly.
  • Since the application process is online, the bank stresses the importance of using secure devices and connections to apply for loans.

Self-reflection questions

These questions can serve as prompts for introspection and self-assessment, helping individuals gain insight into their financial habits, values, and aspirations.
  • Have you ever found yourself in a situation where you relied on digital short-term solutions for financial needs without considering the long-term consequences?
  • Do you always assess your financial decisions and their impact on your future goals?
  • What are your long-term financial goals, and how do your current spending habits align with them?
  • Have you ever sought professional advice or guidance to take online loan? If not, what barriers prevented you from doing so?

Self-assessment questions

Read each of the 5 questions carefully and select the best answer from the options provided.
This multiple-choice test can help assess understanding of Tom’s financial journey and the lessons learned from his experiences.
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