In India, medical emergencies, children’s education, wedding expenses came out as the top reasons for taking personal loans.
NIRA a consumer finance company, came out with a survey, ‘Understanding the Financial Challenges of Working India’, which stated 28 per cent of personal loans are taken for medical emergencies, whereas 25 per cent for family needs such as children’s education, home renovation and wedding expenses.
The report stated, with most of them earning modest salaries that just about cover their daily expenses and leave no additional resources for unplanned expenses, hence, as high as 77 per cent of individuals have relied on unsecured personal loans to make ends meet.
The report also states 41 per cent named interest rate as the main criteria for choosing a lender, whereas 30 per cent named loan tenures and 20 per cent disbursal time as their main criteria.
Rohit Sen, CEO and Co-Founder, NIRA, says “Young working Indians have to shoulder a lot of responsibility. They work hard to make ends meet but struggle to cope when faced with unanticipated or larger-than-usual costs. Since they’re unable to borrow from banks, they turn to local moneylenders who usually charge them more than 100 per cent interest, further exacerbating their financial difficulties.”
Some of the key findings of the survey;
- 87 per cent handled their own finances including filing tax returns and keeping track of EMIs, 55 per cent relied on family and friends for financial information, and 25 per cent turned to social media for information. Interestingly, 5 per cent reached out to a Chartered Accountant for financial documentation help.
- Most respondents did not have any savings beyond the traditional methods like a savings account, cash, fixed deposit, and gold. 40 per cent prefer gold as a mode of investment, even though gold does not give any yield; only 12 per cent had some form of equity investments such as in mutual funds or stocks.
- 60 per cent of individuals’ monthly income went towards their families, 20 per cent to rent, 8 per cent to the daily commute and 12 per cent was put aside as savings – leaving very little to invest in retirement or long-term financial instruments.
- The report also came across as tech-savvy despite largely being from traditional backgrounds. 80 per cent prefered using net banking for transactions and 66 per cent were comfortable using UPI to send or receive money. Only 7 per cent were seen still using cash or cheques.
- ‘How to improve credit score?’ was the most pressing financial question for 35 per cent of respondents, for 20 per cent it was ‘How to pay off loans faster?’