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Wednesday, June 16, 2021

Consumer credit: ‘Almost half of first time borrowers below 30; small ticket loan demand jumps’

Small ticket loans less than Rs 25,000 — characterised by searches for “phone on loan”, “laptop on EMI” and “mahila loan 30000” — in loan disbursals among all personal loans has gone up from 10 per cent in 2017 to 60 per cent in 2020, the report said.

By: ENS Economic Bureau | New Delhi |
Updated: June 11, 2021 5:30:48 am
As per TransUnion Cibil-Google report, with disbursal speed and convenience being the hallmarks of these loans, the digital-first sellers have the largest share in this category with 97 per cent of all personal loans disbursed by them being under Rs 25,000.

In a significant diversity in borrower profiles, 49 per cent of first-time borrowers were less than 30 years old, 71 per cent were based in non-metro locations and 24 per cent were women in 2020, a TransUnion Cibil-Google report has said.

Small ticket loans less than Rs 25,000 — characterized by searches for “phone on loan”, “laptop on EMI” and “mahila loan 30000” — in loan disbursals among all personal loans has gone up from 10 per cent in 2017 to 60 per cent in 2020, the report said.

According to the TransUnion Cibil-Google report, with disbursal speed and convenience being the hallmarks of these loans, the digital-first sellers have the largest share in this category with 97 per cent of all personal loans disbursed by them being under Rs 25,000. “Interestingly, small loan borrowers demonstrate higher loyalty with 42 times growth in repeat customer base amongst lenders in CY 2020 versus CY 2017,” the report said.

The report said there is a perceptible acceleration in credit demand from non-metro locations, with 77 per cent of all retail loan enquiries on the TransUnion Cibil bureau originating from tier 2 cities and beyond in CY 2020. “Also, 70 per cent of total credit enquiries are from existing-to-credit borrowers outside tier 1 cities,” it said.

“Alongside, loan-related searches from tier 2 and tier 3 locations grew by 32 per cent and 47 per cent respectively in 2020 over those for 2017. Interestingly, ticket sizes on loan products like personal loans, auto loans and consumer durable loans are geo-agnostic,” it said. As demand for consumer credit, after a brief decline in Q2 2020, continued to rebound to almost 90 per cent of the pre-COVID-19 levels towards end of the year 2020, 55 per cent of users surveyed for the study reported using an online tool or recommendation to aid their credit purchase decision.

For the past year, the report showcases a significant diversification of demand for consumer credit, with 49 per cent of new-to-credit retail borrowers being less than 30 years old, 71 per cent of them being located in non-tier 1 cities, and increasingly, more women availing credit opportunities.

Underlining the report’s insights is the 2.5 times surge in searches for loans from non-Tier 1 cities than from tiered cities across 2017-2020. Overall, growth in searches for car loans between the two halves of 2020 grew the fastest at 55 per cent with home loans following with 22 per cent growth.

TransUnion Cibil MD and CEO Rajesh Kumar, said: “consumer credit demand and access has undergone a paradigm shift over the last few years, with the post-pandemic circumstances having further accelerated this change.”

The report said 64 per cent of credit buyers say that brand is a major factor in choosing their loan provider.

In 2020, 38 per cent of loans disbursed to the ‘prime’ credit tier was through FinTech NBFCs (non-banking financial company). Additionally, these FinTech NBFCs no longer have only ‘urban youth’ as their primary audience – 70per cent of disbursals are outside tier 1, with 78 per cent of customers being Millennials (between 25-45 years of age).

The report said there was a 2.5 times surge in online searches for loans from non-tier 1 cities between 2017-2020, with 77 per cent of all retail loan enquiries in 2020 coming from tier 2 cities and beyond. “With reference to product type, growth in searches for car loans between the two halves of 2020 grew the fastest at 55 per cent, with home loans following at 22 per cent growth,” it said.

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