People take a quick loan or credit for several reasons – to acquire education, business, jewelry, home, for a wedding, for traveling, or to maintain a certain lifestyle. However, there is a crucial difference in consumers’ needs and wants worldwide. Similarly, The patterns of Indian borrowing also vary from the entire world on a large scale.
The use of credit is much more pervasive in developed countries. However, we Indians mostly apply for instant loans online for the purpose of education, home, weddings, or business.
According to data sourced from different reports – the household-to-debt ratio we hold is 11% when compared to 60 to 120% in developed and emerging nations. Only 70 million Indians, out of the total eligible ones, are credit active instead of holding a valid credit score, and India holds a comparatively lesser mortgage penetration.
While every individual In the US holds three credit cards on average, only one out of 31 Indians carries a credit card. In the past, we Indians have been taking a flexi loan for gold, real estate, and weddings instead of for lifestyle maintenance. However, there has been a noticeable evolution in Indian retail borrowing in several ways.
- Young borrowers – the average age eligibility of a borrower was in their 40s, and there was a shortage of credit products around 30 years ago. Only the super-rich could opt for a credit card. Car and home loans were unheard of, and even our elders usually discussed home loans, wherein the conversation revolved on how to access provident funds. Most people only considered buying or constructing a home in their 40s or 50s. However, if you talk about the current striking contrast – home loans, personal loans, quick loans, business loans, multiple credit cards, and auto loans hold a typical portfolio of various individuals aged from 21 to 35 years.
- The change in preferences – In the past years, people used to frown upon the concept of loans. They used to save for the kids before entering a business line or moving into a new home. But in today’s era, the new concept has an aspirational ideology where now we buy first and pay later. As you begin your first job, you can gain eligibility for a credit card, a pre-approved personal loan or an instant loan online within a few months. There has been a significant increase in demand for personal loans due to a paradigm shift in consumer behavior.
- Digital banking – With the widespread usage of smartphones, the rise of digital banking has transformed the loan application process into a very easy and hassle-free experience. One can learn to apply for a loan and e-submit the documents required. An individual can even expect doorstep, pick up of documents and receive the same day disbursal.
- Smooth evaluation – The credit score was launched in 2007 giving access to the banks for making better and swift underwriting decisions. Organized businesses have expanded with GST. A larger universe is eligible to apply for a credit, and now more accurate income tax and other statutory returns are recorded and filed in larger numbers.
- Informed loan takers- The internet has empowered customers to access updated and accurate information about certain products. A loan taker examines his eligibility while using an online loan, comparison, size, and EMI calculators. The consumer has a variety of lenders that compete fiercely for his business – offering attractive interest rates, instant approval, 0% financing, zero processing fee, and Nil prepayment charges.
With extreme usage of smartphones in sync with central policies such as UPI-enabled digital payments and E-KYC, users have disrupted the financial services landscape in India. Banks are equipped with more reliable and accurate data and now provide credit to the under-banked Indians. The access to fast credit and low cost is an overall winner for the consumers and the economy.