Finance

Changing Personal Loan Trends Market in India

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The idea of the personal loan has changed, and with it, there are some interesting new trends that have emerged in the Indian market. Let us look at a few of these new personal loan trends.

Digitisation

Today, a personal loan can be applied for, approved, and the amount disbursed, all without the involved parties ever being in a room together. Everything happens over the Internet, via computers and/or mobile phone applications, and approvals take a surprisingly short time. As a user, you can shop around for loans on your phone, and lenders frequently have some tools on their websites like personal loan EMI calculators that help you make a decision about the loan even before you apply for it.

Increased competition of providers

Today, it isn’t only banks that provide personal loans – NBFCs (Non-Banking Financial Company) also provide personal loans, and they frequently offer personal loan interest rates that are highly competitive.

Credit score system

Taken from economies that are more credit-based, the Indian economy also has begun tracking the creditworthiness of citizens, and a credit score is assigned to each person. This gives lenders an instant snapshot of your borrowing history and allows them to make a quick decision on what level of risk you provide as a borrower.

Credit lines and pre-approved loans

The credit scoring system has allowed lenders to pre-approve unsecured loans like personal loans and, coupled with the short turnaround time, has resulted in near-instant personal loan disbursements. Lines of credit are another form of instant personal loans – you can withdraw any amount up to the amount that you are pre-approved for with lines of credit. They work quite like credit cards, in fact, but with cash disbursement.

Lower interest rates, higher loan amounts, and long tenures

The market for personal loans has grown in part because the attitude towards a personal loan is more relaxed at both the lender’s and the borrower’s ends. The interest rates on average have dropped, and personal loans can be had for as little as 10.99 per cent interest. Higher loan amounts, to the tune of up to ₹ 40 lakh, are also now available, with repayment tenures stretching to six years. 

Borrowers, on the other hand, are not averse to taking a personal loan for multiple uses, including to finance vacations, the purchase of vehicles, or even home renovation. All of this would have been unheard of a few years ago, which is why the market for personal loans has grown substantially.

Choice of repayment modes has increased

You can choose from a number of repayment modes – a standing ECS instruction that will debit the amount on a fixed date each month, post-dated cheques, or payment in cash. The latter one can be done by the borrower at the lender’s branch, or collection agents can be sent to the borrower’s choice of location for a monthly collection, or whatever the agreed frequency is. There are even some flexible EMI repayment schemes that allow the customer to repay different EMI amounts to help repay the loan quicker.

In an increasingly credit-driven economy, loans and EMIs are not seen as taboo anymore but as a way to get a head start on the good things in life. Loans used to be taken for either appreciating assets like houses or big-ticket items like cars and houses, but the change in attitude has enabled personal loans to become startlingly accessible to almost everyone. 

 

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