The financial services industry in India has evolved significantly over the last few years. Various factors can be attributed to the rising popularity of unsecured credit, such as the introduction of the latest technology, diverse financial products to cater maximum profiles, the government’s push for digital payments, and many more. But one factor that stands out amongst all is the change in the conservative mindset of the Indian borrowers post the 1990’s economic liberalisation. As a result, more and more people have started accessing different credit-based financial products, including Personal Loans, in the last two decades.
Ever since Indian customers have started accessing Personal Loans for urgent financial requirements, the lenders’ offers have undergone a massive transformation over the years. Financial institutions have introduced different types of specialised Personal Loans and new features to attract more customers.
Let’s have a look at how Personal Loans have changed in India.
1. Online and paperless applications: This is perhaps one of the most revolutionary changes in the way we apply for a loan. Unlike yesteryears, when borrowers were required to stand in long queues, lenders now support online Personal Loan applications through their website or mobile app. The customers can apply for a loan simply by uploading scanned copies of their documents and sharing some basic details online. This paperless application process offers much flexibility & convenience to the customers.
2. Quicker processing: The paperless application process has significantly reduced the processing time of a Personal Loan. In-principal approvals are being offered within a few minutes. Many lenders process and disburse the loan amount within one working day itself while most lenders complete the processing within three working days. The quicker processing time has also played a major role in boosting the popularity of Personal Loans.
3. Transparency: Earlier, the lack of transparency used to create distrust amongst the borrowers when it came to Personal Loans. Information was scarcely available, and making comparisons between different offers was problematic. Now, these issues have been addressed effectively. Customers are now accessing information about various Personal Loan offers through the website of financial institutions. All leading lenders ensure up-to-date information about various aspects of their Personal Loan offers so as to help customers make an informed decision. Online EMI calculators and eligibility calculators are allowing the customers to understand the loan completely before availing it.
4. High-value loan amounts: Another major change in the Personal Loan industry has been seen with the quantum of the loan available. Presently, borrowers can avail Personal Loans up to Rs. 40 Lakhs for any financial requirement that they may have. Such high value amounts being available as unsecured Personal Loans have attracted the attention of the borrowers as a potential option during times of requirement.
5. Multiple lenders: In the early ’90s, Public Sector Banks used to be the only option for the borrowers looking for a Personal Loan in India. But things have undergone rapid change in the last decade with multiple categories of lenders now offering Personal Loans. Private banks, NBFCs, and online lending companies are now competing with Public Sector Banks in the Personal Loan market. Due to increasing competition, financial institutions are offering more attractive features that bode well for prospective borrowers.
6. Lower Interest rates: Personal Loan Interest Rates have reduced substantially over the last few years. Around 2011-12, interest rates were around 14-15% per annum, but this has changed significantly. Now, Personal Loans are available with interest rates starting from 10.50% per annum, one of the lowest amongst unsecured credit products available in the market. Lower interest rates benefit the customers in multiple ways as it not only reduces the EMI amount but also lowers the total interest cost that the borrowers have to bear.
7. Different options available: While Personal Loans can be used for any financial requirement that the customers may have, financial institutions are now offering various specialised types of personal loans as well. Wedding loans, home renovation loans, holiday loans, debt consolidation loans are some of the multiple types of personal loans being offered by financial institutions. Many lenders are now also offering the facility of Personal Loan balance transfer and personal loan top-up to attract customers to switch from their existing lender to them.
8. Extended repayment tenors: Repayment tenors for Personal Loans have now increased as compared to the previous times. For quite some time, the maximum repayment tenor available for a Personal Loan hovered around 60 months. But now, when customers avail Personal Loans from specific lenders such as a Tata Capital Personal Loan or an SBI Personal Loan, they can opt for an extended repayment period of up to 72 months. This allows the customers more flexibility with choosing an EMI amount, which they can easily repay.
9. Building credit history: There were times when any form of borrowing was frowned upon by the Indian customers. But this has changed now as people do not see Personal Loans as a liability but as an opportunity. Yes, borrowers are using Personal Loans to build their credit history and improve their credit scores by ensuring timely repayments.
10. Multiple repayment modes: Now, borrowers need not stand in queues to deposit their Personal Loan EMI. Financial institutions are accepting repayments through multiple modes such as cheque, ECS, Standing Instructions, NEFT, RTGS, IMPS, Net Banking, Bill Desk, and several more. Many lenders are offering the facility of the home collection as well through their representatives. These options help the customers repay their EMIs conveniently without any need to wait at the cash deposit counter.
11. Line of credit: This is another major change introduced to Personal Loans in the last few years. Similar to a Credit Card, lenders sanction an amount to the customers as a Personal Loan, but the customers need to pay interest only on the amount utilised instead of the entire loan amount. This helps the customer avoid payment of interest on the amount lying idle in the loan account.
With such noteworthy changes, Personal Loans have indeed undergone a massive transformation in the last few years. This trend is expected to continue in the future as well, meaning more features being introduced by the lenders to attract more customers.
Also Read: Changing Trend of Personal Loans in India
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