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Trends that Have Modified the Current Personal Loan Market for Indians

Rohit Pawar
Trends that Have Modified the Current Personal Loan Market for Indians

Over the past few years, India's financial services business has seen substantial change. Unsecured credit is becoming increasingly popular due to several factors, including the development of advancing technology, the introduction of various financial products to accommodate a wide range of borrowers, the government's drive for digital payments, and many more. But one element stands out above the rest: the shift in Indian borrowers' traditionally conservative mentality following economic liberalisation in the 1990s. As a result, over the past 20 years, more people have begun using various credit-based financial products, such as personal loans. Since Indian consumers first began using personal loans to meet urgent financial needs, the lenders' offers have drastically changed. Financial institutions have offered new features and specialised Personal Loans to attract more consumers.


Let's explore the evolution of personal loans in India.

Paperless applications: One of the most dramatic improvements in the way we apply for loans is the use of online and paperless applications. Lenders now allow online Personal Loan applications through their website or mobile app, unlike when applicants had to wait in long lines. Customers can easily apply for a loan online by sharing basic information and submitting scanned copies of their documentation. The customer has a variety of options & convenience with this paperless application process.


Faster processing: The paperless application process has dramatically shortened the time it takes to complete a personal loan. It takes only a few minutes to receive in-principle approval. While most lenders finish processing loans in three days, many lenders process and release the loan amount in just one working day. Personal loans' popularity has increased significantly due to quicker processing times.


Transparency: In the past, when it came to personal loans, borrowers lacked trust due to a lack of transparency. There was a dearth of information, making it difficult to compare various offerings. These problems have now been successfully resolved. Customers can now get information about different Personal Loan offerings on banking institutions' websites. All reputable lenders ensure that their Personal Loan offers include the most recent information possible so customers can make an informed choice. Customers can fully comprehend the loan before applying with online EMI calculators and eligibility checkers.

High-value loan amounts: The quantity of accessible credit has undergone another significant adjustment in the personal loan sector. At the moment, borrowers can get personal loans up to Rs. 40 lakhs for any kind of financial need. The fact that unsecured personal loans with such high-value ranges are a possibility for borrowers when they need money has caught their interest.

Multiple lenders: Public Sector Banks used to be the sole option for borrowers searching for a personal loan in India in the early 1990s. But over the past decade, a lot has changed, and several different types of lenders offer personal loans. Public sector banks increasingly face competition from private banks, NBFCs, and online lenders in the market for personal loans. Financial institutions are providing more alluring features due to increased competition, which is good news for potential borrowers.


Lower Interest Rates: Personal loan interest rates have dropped significantly over the past few years. Interest rates were approximately 14–15% annually in 2011–2012, however, this has considerably altered. Nowadays, personal loans are one of the market's most affordable unsecured credit products, with interest rates starting at 10.50% annually. Lower interest rates are advantageous to consumers in several ways, as they lower not only EMI payments but also the overall cost of interest that borrowers must pay.


Various alternatives available: Although personal loans can be utilised for any type of financial need that a customer may have, financial institutions are now also providing several specialised personal loan options. Financial organisations provide a variety of personal loans, including those for weddings, home renovations, vacations, and debt reduction. To entice customers to switch from their current lender to them, several lenders are now also providing the option of personal loan balance transfers and personal loan top-ups.


Extended repayment terms: Repayment terms for personal loans are currently longer than they were in the past. The maximum payback period for a personal loan lingered about 60 months for a considerable amount of time. However, customers can now choose an extended repayment period of up to 72 months when they take out Personal Loans from specified lenders. The customers are given more freedom to select an affordable EMI amount.


Multiple repayment methods: Borrowers no longer need to wait in line to deposit their Personal Loan EMI. Financial institutions accept the following payment methods: cheque, ECS, Standing Instructions, NEFT, RTGS, IMPS, Net Banking, Bill Desk, and several others. A lot of lenders provide the option of home collection through their representatives. These solutions allow customers to conveniently pay off their EMIs without standing in line at the cash deposit counter.


Line of credit: Personal loans underwent yet another significant development in the past few years. Lenders grant customers a Personal Loan similar to a Credit Card, but they only have to pay interest on the portion of the loan that has actually been used. By doing this, the consumer can avoid paying interest on the money lying in their loan account.


Personal loans have undoubtedly seen a significant metamorphosis over the past few years with such notable modifications. Lenders will likely add more features to entice more clients as this trend is predicted to continue.

Rohit Pawar
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