The lending market is seeing a continuous growth owing to the increase in instant online loan providers. A research report indicates that the personal loan market will expand at a CAGR of 10% between 2020 and 2024. Borrowers, especially young professionals, can get a personal loan from these companies within minutes.
- Studies suggest that the digital lending market is anticipated to be worth $1 trillion by 2024.
Applicants can apply for a loan either online or via dedicated apps of financial institutions in minutes without the need for documentation in some cases.
Some of the reasons why personal loans are an ideal choice for young professionals are mentioned below –
1. Prompt approval and disbursal to account
The entire process of approval and disbursal to a borrower’s account can take around 24 hours. If they are pre-approved, they can get a personal loan approved and disbursed to their account in under 20 minutes.
For young professionals, quick availability of cash can be beneficial if they have to address a financial emergency.
2.No minimum threshold for the loan amount
Several banks and NBFCs usually offer online personal loan of up to Rs.25 lakh. The loan amount approved for an applicant depends on his or her personal and professional details
- Another research suggests that the average ticket size of personal loans was Rs.35,000 in 2019-20.
Hence, young individuals can apply for a loan even of a small amount without the doubt of facing disapproval.
3.Pre-approved offers to help apply in two clicks
Pre-approved offers are usually available to existing customers of a lender. Such customers may not have to go through a document-verification process as their respective paperwork are already present with the financial institution. Minimal to zero documentation enables such customers to get a personal loan quickly.
Bajaj Finserv provides pre-approved offers to simplify the process of availing financing and help applicants save time. These offers are available on a list of financial products such as business loans, personal loans, etc. Individuals can have a look at their pre-approved offer by providing only their name and phone number.
4.No long list of documents required
Documents required to apply for a personal loan include –
- Officially valid documents for KYC (Aadhaar, PAN, Voter ID, Passport, Driving License, etc).
- Employee ID card.
- Salary slips for the previous 2 months.
- Bank account statements for the last 3 months.
Applicants who are self-employed have to submit additional documents while applying for a personal loan. These can include proof of business ownership, audited financial statements, and income tax returns.
5.Tenors going up to 60 months
Repayment periods of personal loans can go as high as up to 60 months. Borrowers do not have to be concerned about expensive EMIs that can weigh down on their income. They can choose a shorter tenor to keep the EMIs high and save on overall interest paid.
A personal loan EMI calculator can help applicants to find the right tenor based on the principal and rate of interest.
6.Simplified eligibility criteria
Applicants only have to fulfil the following eligibility criteria –
- Fall in the age bracket of 23 and 55 years.
- Employed with a public/private company or an MNC.
- Business vintage of 3 years (for self-employed applicants).
Both salaried and self-employed applicants need to have a credit score of 750 or higher to apply. They must check CIBIL score for a personal loan from the organisation’s official website before applying.
- Between 2016 and 2018, more than half of millennials with a CIBIL score lower than 700 increased the same by an average of 65 points within 6 months.
Holding a good CIBIL score for a personal loan can also help borrowers secure a lower rate of interest.
7. Can be used for multiple purposes
A young professional can avail a personal loan to address more than one financial goal since these credits don’t have any restriction on end-use.
Some of the common reasons to get a personal loan include –
- Debt consolidation,
- Home renovation,
- Higher education,
- Two-wheeler or four-wheeler purchase, etc.
There are several added benefits of using a personal loan for some of the above objectives. For instance –
- Borrowers don’t have to make a down payment when purchasing a vehicle with such loans, which is not the case with standard financing.
- A personal loan can provide tax benefits, under Section 24(b), of up to Rs.30,000 on the interest paid if it is used for home renovation.
Young professionals can avail attractive personal loan interest rates, which can keep the overall repayable amount low. They can also part-prepay or foreclose the loan before the tenor to save on interest.