College students from Wu Han, an inland city in central China, are signing up for easy loans to buy iPhones and other gadgets, but some are failing to make the repayments and end up tainting their credit records.
According to a report on local media site Guangming Online, Chen Gang, a undergraduate from the China University of Geosciences, was struggling to make the 399 yuan (US$64) monthly installment after purchasing Apple's iPhone 5 as a Valentine's Day gift for his girlfriend. He had an allowance of just 800 yuan every month.
With a 2,000 yuan first payment and 12-month installment plan, students like Chen could ill-afford the 5,288 yuan (US$850) iPhone 5, which could be considered a luxury item for the 123 million people in the country who live on just one dollar a day.
Micro-loans provider such as Home Credit, the biggest of its kind in the city of Wu Han, loaned out 160 million yuan (US$27 million) to over 20,000 college students in Wu Han, helping them put iPhones and iPads into their pockets.
"It is much easier to get loans from us than from the bank," said Home Credit's spokesperson. "You could get the money in less than an hour if you are between 18 and 55, and [can produce] any form of ID with you--identity card, bank deposit card, student certificate, driver's license, and so on."
"I bought a laptop on installment last year," said Jiang, another college student, who was applying for a loan to buy his girlfriend's new iPhone. "I should be able to pay back as my parents give me 1,000 yuan a month and I also do some part-time jobs."
But according to Home Credit, about 100 students failed to make their monthly installments in the past year and could not be contacted. The company informed financial institutions of the defaulter's credit record, hence, tainting their credit standing.