5 Significantly Changing Personal Loan Trends in India

Individuals often turn to loans in an event of a cash crunch. Banks and Non-Banking Financial Companies (NBFCs) offer various options to those seeking capital to meet their financial needs.

A very popular type of finance option, known as a personal loan, is given to those seeking funds for various purposes. Financial institutions do not question the intent of the borrower, and hence a personal loan may be used for a variety of reasons, such as funding your wedding expenses, borrowing for your child’s education, purchasing a new home, meeting medical contingencies, or consolidating debt, among others. Such loans do not require the need of collateral and are based on the creditworthiness of the applicant.

Personal loan scenario in India

There have been a series of developments that have taken place in the personal loan sector in India over the years. Though the progress is moving at a very steady pace, a positive change has been noticed in the system.

Following are five significantly changing trends in this arena.

  • Applications are being made digitally

Traditionally, applicants were required to visit their nearest branch and submit their application manually. The documents required for personal loan, too, had to be submitted physically. Individuals, however, may now apply for personal loan digitally. Borrowers may sit in the comfort of their home and seek personal loans online by a mere click of the mouse, thereby enjoying a high degree of convenience.

  • Competition is increasing

The competition between banks and NBFCs has increased. Financial institutions want to increase their sales to boost revenue. To do this, lenders are offering competitive and attractive terms of a loan. While some offer lower personal loan interest rates, some lenders are offering flexible repayment plans. This is, therefore, a huge benefit for borrowers, as they may avail of attractive terms of the loan.

  • Using data analytics for credit rating

One of the most important personal loan eligibility criteria is a high credit rating. Lenders gauge the creditworthiness of the applicant on factors such as income, financial position, and repayment history, among others. However, lenders are now deploying new technologies such as big data and analytics along with the credit rating factors to understand applicants better.

  • Lower rates and fees

Competitive personal loan interest rates, zero processing fees, and nil pre-payment charges are just some of the benefits offered by lenders today. This comes as a huge advantage to those who feared high-interest rates and charges from financial institutions.

  • Numerous repayment modes

Earlier, borrowers would wait in queues to clear their monthly repayment amount. However, repayment of a personal loan has now become easier with various online payment modes such as net banking, Standing Instruction (SI), and Electronic Clearing Service (ECS), among others.

Due to such developing trends, NBFCs are creating customized plans to sell their loans. They are striving to make the application process simpler and are relaxing the eligibility criteria for personal loans, thus attracting many potential borrowers.

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