How Personal Loans Change Financial Dynamics – Satyam Kumar

Financial inclusion has gained a lot of momentum in recent times. During the early stages of the lockdown, chaos in the market led to a financial crisis for individuals and businesses. This resulted in job losses for some and business losses for others, but the expenses remained the same. There was a need to create an easily accessible financial instrument during a crisis like Covid for emergency expenses such as home repairs, weddings, business expansion, travel or medical expenses while allowing them to maintain their liquidity.

India has varying financial dynamics, NBFCs and FinTech companies have crafted personal loans which can be easily availed. The eligibility criteria to benefit from a credit from digital loan players is either to have a minimum monthly income or income, which makes it suitable for both the self-employed and any employee.

With the rapid growth of smartphone users, these players have bridged the credit gap by providing online, one-click access to credit. Individuals in smaller towns can qualify for credit if they meet the eligibility criteria and can access the Internet. Personal loans are an ideal financial instrument for unexpected expenses but also act as a financial shield, especially for the self-employed. Digital lending companies have renovated personal loans so that they meet financial needs without diluting an individual’s liquidity. Repayment plans can be customized according to each person’s income bracket.

The above mentioned features advocate how personal loans can help an individual during a financial crisis. The following tips will guide you on how to avail a personal loan and its added benefits:

  • How can an individual benefit from a personal loan?
    Digital lending companies aim to disburse loans in a faster and more efficient way, that’s why they lend on mobile apps or web pages. All you need to do is create an account on any of the digital lending platforms and check the credit limit availability based on their eligibility criteria.

  • What is the maximum limit for which one can benefit from a personal loan?
    The credit limit can vary from platform to platform and can be up to 35-50 lakhs. The credit limit has been structured to cover all major expenses like wedding, travel, medical, housekeeping, etc. The huge limit allows individuals to be financially self-sufficient as spending will not disrupt cash flow.

  • Will it take days for the credit amount to reflect in your account?
    Digital lending companies have digitized their processes in an effort to provide credit sooner. Generally, it takes a day for the amount to reflect in the bank account, this allows an individual to take care of their urgent expenses without touching their income.

  • Do you need more than one document to qualify for credit?
    Digital lending players lend credit with the aim of ensuring complete financial independence and therefore only ask for the most basic documents. KYC documents, proof of business/income, and in some cases a one-year ITR are all an individual may need to qualify for credit. Since these loans are collateral free, even small business owners can also avail loans for expanding their business or for any other urgent expenses.

Digital lending companies are changing the financial dynamic given the credit gap that existed for many people. Their goal is to provide financial inclusion and empower individuals financially. Maintaining liquidity is a priority due to the volatile nature of the market, one should not spend all of one’s cash.

“Spend only what you earn” is what our elders have always taught us and they did not see “credit” or “loan” in a favorable light, but with the evolution of individual behavior and financial dynamics, it is preferable to resort to a personal loan for emergencies rather than a zero bank balance. So the next time you have an unexpected expense, will you be using your money or your credit?

Warning: The views expressed in the article above are those of the authors and do not necessarily represent or reflect the views of this publishing house. Unless otherwise indicated, the author writes in a personal capacity. They are not intended and should not be taken to represent the official ideas, attitudes or policies of any agency or institution.


Stephen V. Lee