In India, most frequent credit borrowers take Online Personal Loan when they need additional cash for essential financial commitments. Several statistics indicate the growing demand for personal loans in recent years. 77% of the entire working population depend on instant personal loans to fulfill unavoidable financial needs. As per RBI, personal loans recorded 13.5% YOY growth in March 2021. Even first-time borrowers below 25 take small personal loans for emergency expenses. What are the main reasons behind the tremendous demand for different personal loans?
The coronavirus epidemic, which started in the Chinese city of Wuhan in late 2019, caused tremendous damage to the world economy. In India alone, covid-19 contracted the Indian economy by 40% in the first quarter of 2021. So far, the global economy has suffered a considerable loss of $4 trillion due to reduced economic activities. Two hundred million people across the globe are facing unemployment. Those who are in a job are getting reduced salaries for several months. In India, unemployment in rural and urban areas is high. Due to limited earning opportunities, rapidly increasing inflation, and a sharp decline in savings, many individuals are taking personal loans for different purposes.
Digitalization of The Indian Economy
For the last few years, the government of India has been encouraging individuals to use digital transactions as much as possible to make its digital India campaign successful. As a result, banks and different financial organizations use the latest technologies to offer banking services to interested customers. Because of the intense digitalization of the banking sector, now people can open bank accounts digitally, transfer money from one account to another, apply for credit cards and perform other tasks without visiting the local branch of the bank. Now, many Indians are using different UPI payment gateways to send and receive money digitally. As a result, it is possible to apply for personal loans online and get the needed cash in a bank account.
The Availability of Personalized Loan Products
Different people have different reasons to take loans. For example, someone needs money to buy the necessary goods and services while others spend money for medical treatment, foreign trips, marriage parties, etc. That is why the demand for personalized loan products has increased. Moreover, it’s easy to qualify for personal loans and receive the much-needed money in a short time.
The Dramatic Change In Credit Lending Policies
Covid-19, hyperinflation, lack of employment opportunities, reduced monthly income, and other factors have negatively affected the lives of millions of individuals across the globe. In India, many people face different problems. In recent years, banks and financial organizations have changed credit lending policies. Now it is possible to send your application for the loan digitally and get an immediate response from the bank. It has increased the demand for different types of personal loans. Banks also want to serve more and more people with unique loan products to increase their profit margins. In 2022, the overwhelming majority of the working and self-employed people are likely to get personal loans to meet multiple emergency financial commitments.
Detailed Analysis of Personal Loan Advantages
Most prominent banks and financial organizations offer online personal loans to eligible borrowers. Have a look at the main benefits of personal loans-
Personal Loan Eligibility Criteria: It’s Flexible
Personal loans are available to anyone who meet the following eligibility criteria:
Eligibility Criteria For Salaried People
- Indian citizenship,
- Age-21-60 years,
- Permanent employment with central or state government department or any established company,
- Monthly income- Rs 25,000 to Rs 30,000,
- An active bank account that accepts online transfer of money,
- The latest 3 months’ salary slip,
- The latest 3 months account statement,
- Good credit score( between 700 to 900)
Eligibility Criteria For Self-employed People
- Self-employed people must have a registered business entity with GST number and current bank account,
- The applicant must be running his business successfully for at least 5 years or more
- Good business volume in every financial year,
- The credit score of your business,
- The applicant must have a physically verifiable address of the company.
- ITR or audit report.
Abundant Loan Amount With Extended Repayment Tenure
All credit borrowers are looking for loans that promise handsome money with extended repayment tenure. Different banks provide different amounts under the provision of personal loans. On average, you can get cash from Rs 50,000 to Rs 5000000 while applying for online personal loans. Keep in mind that salaried individuals get less amount compared with self-employed people. First-time loan borrowers must not expect a significant sum of money as a loan. Banks analyze borrowers’ overall income and expenses and offer them personalized financial products. Personal loans are available to individuals for 1 to 5 years. The loan is divided into small installments so that borrowers can quickly pay off the borrowed money with interest charges.
Minimal Processing Fee And Fixed Interest Rates
Minimal processing fees and fixed interest rates are two excellent characteristics of personal loans available in India. The bank generally takes 2.5%-3% processing fees from the approved loan amount. Similarly, the interest charges applied on the borrowed money are likely to remain between 9.5% to 13%. The interest rate of personal loans always remains the same throughout the payment tenure. It would help if you went through the details of different offers & consulted independent loan experts to choose an advantageous deal.
Also Read : Common Myths about Personal Loan
An Ideal Financial Aid For Debt Consolidation
Debt consolidation is a process of combining different loans into one loan and paying it off to a new organization with a relaxed interest fee. The problem is that not all financial organizations agree to the debt consolidation process. Personal loans are quite beneficial to people who want to get rid of different loans as soon as possible. For this, you need to choose a bank that is ready to offer personal loans with a debt transfer facility. Just raise a request for debt consolidation with the banking partner selected and complete the required formalities.
The bank will consult other financial organizations from where you have taken different loans and consolidate the debt. Then, pay the accumulated loan to one organization as per the agreement with applicable interest fees. It eliminates the possibility of any delay in loan repayment and keeps you from possible penalties. But keep in mind that you will have to pay a considerable sum of money as monthly EMI for all loans combined.
The Online Personal Loan Application Process
The online personal loan application process is relatively smooth and straightforward. You need to get more knowledge about different offers of personal loans and understand their pros and cons with great attention. Choose a suitable loan package and a banking partner. Now it’s time to visit the bank’s website, navigate the application section, and submit your information correctly. You must recheck the application form before completing the checkout process. Doing so will help you remove incorrect or misleading information from the application form and supply only the correct information to the bank.
Bank executives will take 8 to 10 days to review your application and give a response. However, it depends on the number of applications banks receive for personal loans. If there are too many applications, Bank executives may take more time to verify the supplied information, extract your previous credit records, complete documentation and verification process and then announce their judgment. Therefore, you need to maintain patience and keep tracking the status of your application with the help of a reference number. Remember that it’s not easy to get approved for personal loans because of the strict verification process and background checks. Moreover, the bank might quash your application for different reasons, including submitting inaccurate information, credit score, frequent job changes, insufficient income, aggressive or stubborn attitude, criminal cases, etc.
Therefore you need to follow the below-mentioned recommendations-
- Submit one application for personal loans at one time,
- Quickly answer the calls of a bank executive and supply them with the requested information as soon as possible,
- Use only certified documents for loan processing and always be ready to show the original copies of papers whenever bank executives demand,
- Don’t be afraid with background checks if you haven’t done anything wrong,
- Don’t mislead Bank executives with incorrect answers to their questions. It isn’t easy for them to verify your details and process the application. Supplying inaccurate information can lead to the rejection of your loan application.
- Make sure you share the correct bank account details with the lender. It will help you get the requested money once your loan is approved and the banker releases the amount.
Top Up Personal Loans
Suppose you have already taken a personal loan for a financial emergency. However, if a new requirement for cash pops all of a sudden, you would not like to apply for a separate loan and waste your valuable time in completing different formalities. In such a situation, top-up personal loans are pretty helpful. Just contact your existing bank and share your requirement for additional money. The bank can easily verify your details as you already deal with them. Ideally, top-up loans promise to offer borrowers 70-80% of the existing debt. Nevertheless, the bank will always verify your ability to pay the borrowed money before issuing a particular loan amount. Therefore, top-up personal loans are helpful if you are out of cash and have an urgent cash requirement.
Pre-closure of the loan
Personal loans are available with a prepayment option. Many borrowers take a loan, fulfill the emergency financial need, but they can’t keep repaying the loan in small installments. Financially strong individuals often choose loans with pre-closure facilities. They can refund the entire loan amount with all applicable interest fees at one time by paying pre-closure charges to the bank. It allows them to move anywhere in the world for different purposes without being haunted by bank executives for loan repayment. Early repayment of the borrowed money makes your credit score stronger and helps you get approved for loans quickly in the future.
You Can Improve Your Credit Score With Personal Loans
Having a bad credit score brings about several problems in your life. The bank doesn’t trust your repayment potential and refuses to process your loan application. In the same way, you find it difficult to get rented homes because landlords always doubt your ability to pay the room rent at the right time. That is why individuals try to improve their credit scores using different methods.
In India, personal loans are available to individuals with excellent credit scores. In most cases, the bank will quash your request for online personal loans if you have a poor credit score. But there is an exception to this rule. If
- Your present financial condition a satisfactory,
- If You have stable employment with a regular monthly income
- You have resources to ensure timely payment of the borrowed money,
- Can arrange a secondary borrower ( with a decent credit score and financial background).
Then the bank might approve your application form for small personal loans despite your poor credit score. It helps you come out of difficult financial situations and improves your credit score by making timely repayment of the borrowed money. Banks have the upper hand in such a deal because bank executives will recover the unpaid loan from the secondary borrower if you don’t repay the loan amount.
The Fate of Personal Loans In 2022
It is believed that the interest rates of personal loans will decrease in 2022. As a result, it will increase the overall demand for the loan by leaps and bounds.
The new year is not different from 2020 and 2021. We are still struggling with many issues simultaneously, such as decreased business opportunities for companies, lack of good jobs for working professionals, reduced salaries, covid-19, reduced movement of people from one place to another, etc. All these factors harm the overall financial condition of people in our country. So, the demand for personal loans will be high in the first and second quarters of 2022.
Personal loans are taking over India’s financial market despite different attractive loan packages. In 2020 and 2021, many individuals applied for various personal loans and successfully got the much-needed money. It wouldn’t be wrong to say that personal loans will have a leading position in the credit lending market in India in the coming years. So, apply for loan online get the requested money after completing a few formalities and lead a comfortable life every day. Happy borrowing.