When Wu Qi and her husband traded in their Mazda 3 for a more expensive Mercedes Benz sedan, they applied for a 200,000 yuan ($29,000) bank loan to help pay for it.

They got the money within minutes.

Quick and easy access to credit has encouraged many young Chinese to go into the red to buy cars and apartments they could not otherwise afford.

They are the faces of China's growing addiction to debt, which along with government and corporate borrowing, has raised fears of a looming crisis and prompted Moody's ratings agency to slash the country's credit score last week for the first time in nearly three decades.

"It is very easy -- the car company encourages you to borrow the money and enjoy the car," said Wu, 39, adding the couple is also paying off a one million yuan mortgage for a three-bedroom flat in Beijing.

Since Chinese leaders turned on the credit taps in late 2008 to shield the country from the global recession, household borrowing has soared and pushed China's overall debt liabilities above 260 percent of gross domestic product -- compared with about 140 percent before the crisis hit.

But slowing growth in the world's second-largest economy has raised concerns that years of risky lending could lead to a disaster worse than the US sub-prime collapse.

"While such debt levels are not uncommon in highly rated countries, they tend to be seen in countries which have much higher per capita incomes, deeper financial markets and stronger institutions than China's," Moody's said.

- Rapid rise -

Household debt has become the major driver of China's credit growth, expanding by an average of 19 percent a year since 2011, said Chen Long, an economist at Gavekal Dragonomics.

If it continues to grow at this pace, household debt would reach roughly 66 trillion yuan by 2020 -- more than double the current level -- and potentially 70 percent of GDP versus 30 percent back in 2013.

"Other countries have usually taken decades to complete such an increase," said Chen.

"For bank lending to households to rise very rapidly usually means lending standards are loosened so credit is extended to both more and less creditworthy consumers."

Mortgages make up the bulk of household debt.

Chinese have long favoured putting their savings into bricks and mortar due to the low bank deposit rates on offer, volatility in the stock market and strict rules that make it difficult to invest money abroad.

"It's a safe choice," said homeowner Charlie Liu, 26, who also rents out her flat on Airbnb to help cover the repayments on her 1.4 million yuan mortgage.

But as apartment prices have soared -- often doubling within a few years, particularly in major cities -- fears of a real estate bubble have mounted.

The government has responded by periodically tightening restrictions on property purchases and hiking minimum down payments -- up to 80 percent for a second home in Beijing, according to state media -- to stabilise the market.

But prices continue to rise, forcing young homebuyers deeper into debt.

Wang Yuchen, 28, borrowed three million yuan from the bank in August to buy a 4.75 million yuan apartment in Beijing.

Lacking enough cash, Wang turned to his parents and friends to help pay the deposit.

"In 2012 I could have bought the same apartment for 1.5 million yuan," Wang said.

"I'm a little bit worried but there's nothing I can do. Last year I was getting married and it's tradition in China that you have to have your own house to get married."

- Cheap loans -

Borrowing money for a car is also becoming more popular as consumers, particularly millennials, take advantage of very low interest rates.

Auto financing has been soaring by 40 percent a year and high-speed growth in the sector is expected to continue, said Ron Zheng, an automotive expert at Roland Berger consultancy.

"Before I bought this new car I never thought I would change my old car because nowadays you can hire a car using (ride-hailing app) Didi and Uber which is quite convenient," said Wu.

"And then I found that a new car is not that expensive."

Facing dire warnings, Chinese policymakers are taking action to tighten balance sheets, halt risky lending and dispose of bad loans.

But there are doubts about Beijing's willingness to clean house given its heavy reliance on freewheeling credit to drive economic growth.

"We will see how it can extricate itself from the same 'grow now ask questions later' trap that all other command economies have slipped into in the past," said Michael Every, senior Asia-Pacific strategist for Rabobank.

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