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Real Money for Realistic Dreams

04 July 2012

Indians are loosening their purse strings. Dreams are getting bigger, confidence is on the rise and tight-fists are opening up for credit, to make aspirations a reality. The nation’s economic progress, which has been fueling job and income growth, has made Indian consumers freer spenders. Personal Loan information obtained from Data from the Central Statistical Organization (CSO) reveals that household savings in India are tipping down as consumption is perking up and leverage is rising. The household savings rate (expressed as a % of GDP) declined sharply to 22.8% in 2010-11 from 25.4% in the previous year. While a snip in savings could also be attributed to inflation, a general tendency towards higher spending is seen as a key factor.

That discretionary spends are up is reflected in the buying patterns of households. Expense on basic categories like food & beverage along with rent, fuel and power has declined from 54% of total household expenditure in 2004-05 to 42% in 2010-11. Consumers are today splurging more on furniture & home products, clothing & footwear, transport & communication and non-traditional products and services. The technology and communications boom fuelled by the iPhones, Blackberrys, iPads and X-boxes has created a whole new genre of products that people are itchy to get their hands on.

What is fuelling purchases of some of these high-desire products is easier credit. Taking a loan is no longer taboo, rather a “done” thing. After seeing big gains from leveraging incomes for loans to buy homes, the Indian consumer is now lining up to avail loans for fulfilling other dreams. These dreams, which come in different shapes and sizes, can’t always be slotted into the popular home and car loan buckets. For buying that snazzy new gizmo, which you know you can pay for from a small slice of your income over a few months, you need a personal loan.  These no-security-required Personal loans eligibility are based on your income. Naturally, therefore, they come a tad pricier than secured credit like home loans. But the flexibility is what makes them attractive.

Whether it be money for a grand wedding in your hometown, the perfect holiday in Hawaii, a forever diamond for your loved one, a career-changing foreign university course for your child, or the new 53-inch smart TV, it can be secured by opting for a personal loan in India. The flexibility offered by a personal loan has fuelled sharp growth in the segment. Personal loan details reveal that disbursals have been growing in the region of 25% annually over the past few years.

These loans have also been used as top-ups, over standard loans like home loans, to fill a funding gap. For instance, while loans for homes come with a limit on financing linked to the property value, usually near 80%, the borrower can look to add to this amount with funds from a personal loan. The personal loan funds can also be used for furnishing the house, unlike the home loan, which has a defined purpose of financing the purchase of the property. Similarly, while you can avail of an education loan to fund your child’s tuition fee in a foreign institution, you might also like to provide your child with a kitty for personal expenses. This dollar purse can be financed through a personal loan.

An important point you must be careful to appreciate about personal loan interest rates is that these are pricier (usually @14%+ per annum), given the higher risks for the lender. You must therefore be very confident of your ability to pay down the loan within the stipulated period. Also, given the high variance in rates on offer for such loans, you need to shop smart for the best deal. Click here for a quick look at the best offers on Personal Loan.

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