Significant Percentage of Borrowers Prefer to Get a Loan Online: Survey
A significant percentage of borrowers, led by millennials, prefer online mode to secure loans over traditional offline channels, indicating an increase in digital penetration during the COVID-19 period, a survey has found.
After the second wave of the COVID-19 pandemic, shows a largely positive consumer borrowing trend and, therefore, reflects a return to normalcy as consumer sentiments are positive and buoyant about the economic recovery, according to an annual How India Borrows (HIB) survey conducted by the financial firm Home Credit India.
Nearly 40% of borrowers have shown their willingness to switch to digital platforms to take out loans. This is in addition to the 15% of customers who have already switched to online lending instead of traditional offline channels.
While technology was a key enabler, survey results reveal that like all digital trends, familiarity and trust in the chatbot is driven by younger customers driving it.
The HIB study was conducted in 9 cities including Delhi, Jaipur, Bangalore, Hyderabad, Bhopal, Mumbai, Kolkata, Patna, Ranchi. The main sample size was over 1,200 respondents (Home Credit customers) in the age bracket of 21 to 45, with an income of less than Rs 30,000 per month.
There has been a sharp decline in borrowing for household current expenditure to 4% in 2021, from 85% last year, showing a transition from need-based borrowing to want-based borrowing in due to the recovery of the economy, said the investigation report.
There was a notable increase in borrowing for the creation or expansion of a business, accounting for 28%, followed by small loans or credits for the purchase of durable consumer goods at 26% of total borrowing, a he declared.
Other positive reasons were home renovation/new construction (13%), medical emergency (2%), car loan (9%), marriage (3%), college loan (2% ), investments and the return of a previous loan, etc. (1 percent).
The survey identified a more than 50% increase in borrowing from 2020, but borrowing for the common household has fallen, he said.
The pandemic has also led to the acceleration of digitalization, as an increasing number of borrowers prefer to adopt the online lending journey for future borrowing, thus enhancing digital empowerment in financial services, although the penetration of the financial literacy is still ongoing, Home Credit India, said Chief Marketing Officer, Vivek Kumar Sinha.
With many people experiencing job loss, pay cuts, this has led to increased consumer needs for business resumption this year.
Regionally, the survey results highlight that Bengaluru and Hyderabad recovered faster from the pandemic, with 41% of respondents in Hyderabad having taken out business recovery loans and 42% of respondents in Bengaluru for purchases of durable consumer goods.
While states like Bihar and Jharkhand have the lowest internet population at 24% and 29% respectively, digital literacy in terms of mobile phone usage in Patna and Ranchi has been recorded at 64% and 65% respectively , did he declare.
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