How Debt is Becoming a Way of Life for Millennials in India?
India is one of the youngest nations in the world, having the largest proportion of millennial population. With a majority of working populace, our youngsters are also turning into independent financial decision makers. Their spending habits and purchase patterns are entirely different from the previous generation. Various experts suggest that generation Y is more leveraged than the generation X and are not intimidated by credit. They are more open to the idea of availing a loan for their “wants” or “desires” rather than “needs.”
Various Types of Credit Facilities Availed by Millennials
With development of FinTech sector, it has become extremely convenient for anyone to avail a loan online. The younger generation is widely known for high usage of smart phones and receptiveness to the latest technology, and as such, they are able to make the maximum use of the easy availability of various online credit facilities. Following is a quick list of popular financial products amongst millennials:
Credit Cards are one of the most popular financial products amongst the young population. Credit Cards work like unsecured Personal Loan. They enable the user to take care of various expenses, without having adequate balance in their account. Credit Cards are highly popular because of the multiple rewards, discounts, and cash-back offers on specific transactions. In India, Credit Cards are mainly issued by banks and can be conveniently applied online from the lenders or their partner vendors.
Personal Loans are unsecured loans that are offered by various financial institutions in India to help the borrower take care of various urgent financial expenses such as further education, dream vacation, marriage preparation, and so on. Personal Loans do not require any collateral to be pledged and can be used as per the preferences of the borrower. The swift processing of loan sans collateral makes personal loans attractive to millennials. By maintaining good credit history and repayment discipline you can expect swift Personal Loans Online Approval.
Home Loans are offered by various financial institutions to help borrower buy a residential property. In fact housing loans are readily available at attractive interest rate starting from 8.35% for up to 30 years, making it ideal for millennials looking out to buy their own home.
With start-up culture at its peak in India, most millennials have entrepreneurial ambitions, and in order to fulfill those ambitions, they are seeking out availing Business Loans. These Business Loans are available from most of the lenders in India and come with a repayment period of up to 84 months and maximum available amounts going up to 50 Lakhs.
Various other loans such as vehicle loan, education loan, and more are being highly sought after by millennials in order to take care of their rising aspirations and desires.
Millennials and Debt Trap
In the present economic environment, it takes a lot of financial discipline on the part of the borrowers to manage their financials efficiently and remain debt free. Many Millennials are fast ending up in a debt trap due to the lack of financial discipline. Following are some of the reasons as to why some millennials end up in debt:
High Usage of Credit Card
Due to various benefits offered by Credit Cards, people end up using it for even small expenditure in the hope of getting some reward points. While accumulating credit card debt many fail to realize the underlying high-interest cost against Credit Card balance. On non repayment the interest can go up to almost 42%. In order to avoid Credit Card debt, it should be used only for major expenses and that too with precision for timely repayment.
Being highly aspirational, millennials end up buying expensive things through the use of credit facilities. It is necessary to make it a point to curb impulsive spending and buy only those things which are really needed.
High-Interest Personal Loans
Most of the young aspirants are in such a hurry to avail a Personal Loan that they forget to do some research to pick lower interest loans. Haste in financial matters could be waste and can challenge their repayment capacity. Therefore, adequate research and bargaining is a must before availing a loan.
Non-payment of EMIs (Equated Monthly Instalments), making a minimum payment towards Credit Card dues, borrowing more than what can be paid back– these are some common instances of financial mismanagement that pushes one under a mountain of debt. In order to avoid such a situation, it is important to consult with a financial planner or a senior family member to get necessary help with proper financial planning.
It is thus imperative for millennials to exercise strict financial discipline to avoid ending up with a mountain of debt which can destroy credit score significantly.
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