Personal Loans Dominate the Market Even in FY24
5 min read | 5 months ago
Personal Loans Keep Dominating the Market Even in FY24
Want to apply for personal loans online? You are not alone, going by current reports that highlight how personal loans have continued to dominate the financial services market, even for the financial year 2024 (FY2024). Let us look at some of the key facts in this context along with some tips that will help you obtain a personal loan smoothly without any hassles.
How Personal Loans are Now the Preferred Choices for Most People
It goes without saying that the digitization of personal loans has contributed immensely towards their popularity amongst a major chunk of the Indian population. Features like instant loan approvals, quicker processing times, competitive interest rates, easy online application procedures, and flexible repayment options have made personal loans more accessible to many people throughout the country. Here are some facts and figures that will illustrate how these loans are now the preferred choices in the market.
- Banks witnessed growth in their personal loan portfolios in the first 11 months of FY23.
- This cumulatively went up by a whopping Rs. 11 crore, touching a total amount of Rs. 52.7 lakh crore, thereby contributing a huge 1/3rd of overall bank credit (which stands at Rs. 162 crore for this period).
- The RBI (Reserve Bank of India) has released monthly figures, where it clearly shows how personal loans have a higher share in the non-food credit category, increasing the same to 32.6% as of February 2024 in comparison to 30.6% in the year-ago period.
- Even a couple of years earlier, the personal loan share in the pie was 29% and it has grown exponentially since then.
- Other reports have highlighted how unsecured personal loans increased by a whopping four times to Rs. 13.32 lakh crore as of March last year. Now factor in how this was Rs. 4.26 lakh crore in March, 2017, and you will understand how much personal loans have grown over the years.
- In total, the number of personal loans near-tripled during this time to a huge Rs. 51.7 lakh crore as per analysis and reports by Care Ratings.
- This further means that the personal loan book of non-banks and banks also witnessed an increase of 1.5 times from FY17 to FY23 and then accounted for 30.3% of Rs. 170.5 lakh crore in credit as of March, 2023. This was Rs. 18.6 lakh crore or 21.5% of the total loan pie by the end of FY17.
- The lending surge may be due to reasons like more demand for credit owing to income/financial crises, easy access to lending solutions, digitization, and more.
- Now coming to the last quarter of 2023-24, CRIF-FIDC data has illuminated how the loan volume from non-banking companies (NBFCs) touched a whopping Rs. 64,778.27 crore in personal loans. This has clearly surpassed all other categories of loans, such as gold loans, higher education loans, auto loans, healthcare finance, and a lot more.
- The CRIF-FIDC data also reveals how the year-over-year personal loan increase achieved 32% with quarter-over-quarter increases going to 10% alongside. Disbursements in personal loans have also gone up by a whopping 141%, thereby highlighting the pattern of people looking more towards readily accessible credit for financial assistance.
After you get a grasp of these figures, it is time to look at a few tips that will help you get a personal loan with minimal hassles.
Tips on Getting Personal Loans
If you wish to obtain a personal loan easily without any problems, then here are some tips that you should keep in mind.
Build and improve your credit score beforehand - A high credit score is the best way to increase your chances of personal loan approvals. This will also help you get a lower rate of interest and more favorable terms and conditions. Make sure you pay your credit card bills or loan dues (if you have them) in a timely manner without a single default or missed payment. Also start improving your credit score and keep at it for a few months before you apply for a personal loan. You can check your credit report for any errors or inconsistencies that may otherwise hamper your score.
Calculate your credit utilization ratio carefully - This matters immensely when you are applying for any personal loan. It is the proportion of the credit that you have obtained, divided by the credit that is available currently to you. This indicates your dependence on credit and you should strive to keep this ratio at 30%. In case you have several loans or credit card debts, try clearing some of them before you apply for a fresh personal loan. You should always track the percentage of your money that you are using on credit and keep this at a proper percentage as mentioned.
Do not submit multiple applications - Avoid applying for multiple personal loans or credit cards simultaneously, since each application will be taken as a hard inquiry. In case there are too many of them, it will negatively impact your credit score.
Try using your salary account - If you are a salaried professional with a bank account where you receive the funds every month, try leveraging the same while applying for your personal loan. The lender will already have access to your KYC and income details, making it easier to obtain a personal loan easily with almost zero-paperwork and other formalities. You may also use your relationship with the bank to negotiate lower rates of interest and other payment terms.
Compare offers and interest rates - You should always compare the terms and conditions and interest rates carefully across multiple banks before you finalize your loan. Approach a bank that you already have a relationship with and get a benchmark interest rate offer that you can compare with other lenders. Watch out for special promotions and offers from lenders periodically, which come with benefits like personal loan interest rate discounts, processing fee waivers, and more.
Conclusion
There are several advantages of using a personal loan to cover immediate financial needs and repay the amount conveniently throughout your preferred duration. However, you should keep the above-mentioned tips in mind and check loan agreements minutely before signing on the dotted line.
FAQs
1. What is a personal loan?
A personal loan is an unsecured loan that is given to customers for various purposes, depending on their requirements. They are relatively easier to obtain than many other loan types.
2. What are some examples of secured loans?
Some secured loan examples include home loans and car loans, where the vehicle/property is used as collateral for the same.
3. Can I take a personal loan for buying a washing machine?
Yes, it is possible to take a personal loan for any purpose that you feel fit, including purchasing a washing machine.
About Unity Small Finance Bank
Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.
