Personal Loan Demand Spikes Amid Economic Slowdown

Even as the Indian economy is witnessing an economic slowdown, there has been a spurt in demand for personal loans, a recent report by the credit agency, TransUnion CIBIL, has revealed. Economists and market experts attribute this increase in demand to a concurrent decrease, or stagnancy, in the purchasing capacity. The majority of the spike in demand for personal loans is from Tier II and Tier III cities, along with locations in semi-urban and rural areas, as per the report. And, the driving force behind this increase in demands is the youth of India who has taken recourse in securing personal loans to meet their diverse financial requirements, the report says.

Understanding the economic slowdown in India

  • India’s Gross Domestic Product (GDP) growth rate stood at 4.5% from July to September 2019. This was an all-time low when compared to the GDP growth rate figures for the last six years. Overall, the country’s economy showed a growth rate of 5% in 2019. This again was the lowest in the last 11 years.
  • This low growth rate was accompanied by a lack of employment opportunities as well as a retrenchment of employees across sectors. Stagnation of real wages coupled with rise in inflationary trends was also seen.
  • To counter the slowdown, the government took a series of measures, like revival measures in manufacturing, automobile, and real estate sectors. The Reserve Bank of India (RBI) also tried to ease retail inflation, by reducing the repo rate by a total of 135 basis points in 2019.   

The present status

The RBI, in January 2020, has predicted a growth rate of between 5.5% – 6.0% from April to September 2020. According to the Consumer Price Index (CPI), retail inflation stands at 7.59% in January 2020, the highest in the last five years. The government, however, has assured that the slowdown has bottomed out and India’s GDP growth rate will be back to around 7-8%.

Understanding the CIBIL report

  • India’s information and insights company, TransUnion CIBIL recently came out with a report titled ‘India Retail Credit Trends’ which says that consumer credit increased in the third quarter (July – September) of the financial year 2019 because of the concurrent increase in demand for various credit services. Even as the overall consumer loan products decreased from 23.2% in 2018 to 13% in the given time period, demand for personal loans increased.
  • The number of new accounts for personal loans in the third quarter of 2019 showed a staggering growth of 133%, with over 7.3 million new individuals. The personal loan demands in rural and semi-urban areas saw a sharp spike of 31.5%, while those in metro cities and urban areas increased by 25.8%.
  • Primarily, the youth accounted for the upward trend of securing personal loans. According to the CIBIL report, 42.6% of the personal loans were availed by people between the age group from 18 to 30 years.

Understanding implications of the CIBIL report

  • Market experts believe that the spike in personal loans implies that people are meeting their manifold expenditures through this credit facility provided by financial institutions. Though a personal loan allows individuals to meet their financial expenditures, market experts suggest not to depend entirely on credit.

Benefits of personal loans:

  1. Personal loan allows you to meet diverse financial requirements: Be it expenses for wedding, travel, higher education, home/office renovation or a medical emergency, personal loans always help you to meet all your financial worries. Personal loans can also be used for debt consolidation, where you can consolidate multiple debts into a single high-value loan.
  2. Ease and convenience: Personal loans don’t require cumbersome paperwork and can be availed within minutes. For instance, the Bajaj Finserv Personal Loan, available on Finserv MARKETS, is approved within 3 minutes once you fulfill the basic eligibility criteria. You can avail of a loan amount of upto 25 lakh without any collateral which would be disbursed within 24 hours in your bank account.
  3. Simple eligibility criteria: The Finserv MARKETS loans come with very simple eligibility criteria. You just have to publish a few basic documents supporting the fact that you’re a salaried individual between 23 and 58 years of age.

Conclusion:

A personal loan helps you to meet your financial goals, no matter whatever the situation comes through. Be it paying your debt or buying a house, starting a new business or upgrading your living standard, this loan can sort all your financial worries.

Bajaj Finserv Personal Loan, available on Finserv MARKETS offers loans at a very competitive interest rate with quick approval in just 3 minutes and the loan amount would be credited into your bank account within 24 hours. Even amidst this economic slowdown, you can avail a online personal loan amount of upto Rs. 25 Lakh with flexible repayment tenures ranging between 12-60 months.

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