Today, it’s easy to get a personal loan in a few minutes, whether you convert your spending into EMIs, apply for a quick loan, pay off your debt at the earliest etc. It is quite serious that the unsecure loans have a huge portion with the banks/ financial institutions already, in the last 8 financial years.
According to a recent study by Reserve Bank of India in the year 2010, the total personal loan amount with banks are nearly Rs. 5.89 lakh crore. This level has risen to Rs 19.33 on June 2018. Consumer durable loans were at Rs 8,138 crore on May 2010 was, and on June 2018 it was about Rs 20,300 crore. Outstanding credit cards’ amount are at Rs 19,579 crore, as on May 2010 was and on June 2018 it was about Rs 74,400 crore. This is the total calculation for unsecure loans, no collateral security is attached here.
The main question here is are we borrowing more than our capacity?
Recently, we’ve been witnessing changes in the way banks operate, and the emerging importance of retail lending. The sizeable amount of retail loans is a result of the changed plan of action. Since the strategies have changed, a volcano of financial & structural changes have come up. Broad categories like pledges, car/auto loans are simple and can be paid back in time. This is after the consideration that fixed assets are attached as collateral. The diversified category is of larger interest and needs sufficient amount of surveillance. They are typically unsecure loans used for varied purposes like marriage, investment, renovation, shopping etc.
How can we figure out these interested prospects? A massive chunk of customers is opting for personal loans, consumer durable loans falling in the working category between 25-45 years of age. Keeping the metro cities under purview, with respect to the geography, topography, cities (population over 10 lakhs) accounted for 80% of the credit card base in the financial year 2017. However, the concentration of the bigger cities is sharply falling low, from 99% to just 75-80% in the same year.
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What’s the root cause lying underneath?
In the well developed countries like US, UK, some families are leading a luxury lifestyle. A lot of people prefer payday loans to match their needs and others use a credit card to make utility payments possible. So, when can we expect such a day in India?
Conventionally, Indians have been orthodox in their conduct so even when they could afford a credit card. Their willpower was stronger than their credit appetite by Indians households.
Of course, lending & borrowing is much easier in India, however the rules to follow remain unchanged. To sum up, you can strictly follow to not go beyond your financial capacity. Here are a few rules to follow while taking a personal loan.
Don’t borrow more than you can afford. Take a loan that you can easily pay back in time. You need to be extra careful to try personal loans. Do not add upto purchases on EMI installments. Keep the cashflows ready for emergencies.