Customers can get a personal unsecured loan to meet almost any need and can structure the repayment schedule as per their convenience
Customers seeking an unsecured personal loan are in a sweet spot. Lenders are happy to extend loans with flexibility in terms of the loan amount, tenure and repayment schedules.
If earlier, taking a loan for a holiday or paying coaching class fees was difficult, today there are loans easily available for such purposes. There are loans available for medical treatments – both for emergencies and elective procedures like hair transplant or plastic surgery.
The new-age NBFCs and online intermediary platforms are using technology to both acquire and vet customers and decide their creditworthiness. This is bringing the cost down and ensuring better quality of customers. In the bargain, the customer is the winner.
Traditionally, personal loans have been used for holiday funding, paying fees, medical emergency or even debt consolidation. But today intermediaries are working jointly with merchants to offer loans for specific needs.
“When I work with an education partner, travel partner, or healthcare partner, I know that the customer will use the loan for that purpose. It lowers the risk for the lender, while for the merchant it is assured business,” said Anirban Dutta, who heads, strategic partnerships and alliances for DigiLend, an online marketplace for unsecured loans. Hence, approval rates too are higher, around 50% as against about 30% earlier.
According to Aditya Kumar, founder and CEO, Qbera, an online lending platform that provides loans to salaried people, fintech companies have significantly lower cost structure when it comes to on boarding the customer and maintaining and servicing the loan. “Breakeven on the loan product is much shorter than typically for the bank. Hence, we are able to pass on the flexibility to the customer,’’ he said.
Specific uses
Holiday, home renovation, medical emergencies are some common reasons that people take loans for. Even if you have a fairly high credit card limit, the rate of interest is high. And it is cheaper to take a personal loan than maxing your credit card and repaying a high interest rate.
DigiLend also offers loans in the wellness space for treatment for hair loss. It has tied up with Richfeel Health and Beauty, to extend loans for such treatments.
“Cosmetic wellness is a segment that has grown largely because the element of risk is far more limited. It is an elective procedure that customers opt for,’’ Dutta said.
According to Seema Bhadoria, CEO, Richfeel Health and Beauty, a lot of customers who earn between Rs 20,000 and Rs 40,000 monthly income, take loans for such treatments and the average financing ticket size is Rs 50,000. The repayment period in this case is a maximum of one year.
“People are conscious of they way they look and don’t mind spending the money because this is the persona they are going to be carrying. When we started payment and finance options we saw sales increase by 15-18% in the first month itself,” she said.
Initially, Richfeel offered Re 1 downpayment with 0% interest rate, but saw high defaults of almost 5-6%. So, now they offer schemes with downpayment. The downpayment could be two installments for a 10-month treatment or four installments for a 12-month treatment. In some cases, one has to pay only the processing fee of about Rs 800.
Flexibility in loan terms
Fintech companies are able to offer customised repayment schedules due to the strong IT processes and automation, said Amit Tewary, chief operating officer, Loan Tap, a loan processing platform with an in-house NBFC. “Our products are designed for events in life such as holidays and weddings. Based on that, I can structure the repayment cycle. For instance, someone who has taken a wedding loan, prefers a lower monthly outgo in the initial few months. We can scale up repayment after that. That is not what a conventional bank can offer,’’ he said.
Another option is the flexibility to repay a higher amount when you get a bonus at work, say once every six months. Only a data driven organisation like fintech companies can offer this kind of flexibility, Tweary added.
Qbera offers a loan jointly with an NBFC partner where after 12 months there is no prepayment penalty.
TAILOR MADE LOANS
- Smaller amounts and repayment tenures for personal loans
- Loans available for medical emergencies and procedures like hair transplant or plastic surgery
- Monthly repayments can be lesser in the initial period of the loan and higher later
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