Changing Personal Loan Trends In India

In the span of the last 10 years, the ease of banking has transformed the borrowing behaviour of Indians up to a large extent. The most radical change has been witnessed in the personal loan market, and it is continuing to grow. Here are some factors that have influenced the consumers and brought about the transformation.

1. Ease of Access: Digital Transformation in Personal Loans: With all the banks operating on the digital platform, most of their products are available online, including personal loans. Such is the ease that you can sit in your bedroom and understand the intricacies and prerequisites for loans.
2. Rising Competition in the Lending Market: With more and more financial institutions coming into the lending market, there is an ease in the erstwhile brutal and excessive scrutiny of personal loans. Most banks need to increase their sales number and therefore stick to the only necessary evaluation parameters.
3. Minimal Documentation: Being an unsecured loan, the list of documents that need to be submitted has considerably reduced as compared to the other forms of loan. Here you just need to submit the proof of identification, proof of address and proof of income to get your loan sanctioned.
4. Increase in Financial Awareness (Multi-Purpose Loans): With the increase in financial awareness, consumers are comfortable in listing out the options they need to fund their purchases, whether it is home decorating, furniture or a travel plan.
5. Flexible Repayment (Tenure and EMIs): Most banks provide you with the option to choose your loan tenure based on your income capacity. There are options of choosing loan tenure from 1 year to 5 years, depending on your interest rate as well as EMI. In addition, you can also alter the plan midway and go for a long or a short-term repayment.
6. Introduction of Credit Score System: The credit score, given by Credit Information Bureau India Limited (CIBIL), is the most important determinant of your creditworthiness. With the inception of this system, the banks are able to identify every lending information regarding their respective loan applicants.So, if you have a good credit score, you automatically become eligible for a loan.

As already seen, the high lending trends of personal loans are quite high. However, it is imperative to evaluate your needs and avoid unnecessary loans. This includes not only personal loans but also other liabilities like a credit card debt. An unmanageable liability burden can disrupt your finances and tarnish your credit score.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.