According to a survey conducted by NIRA, 77% of people are dependent on personal loans to meet daily expenses.
The survey, titled ‘Understanding the Financial Challenges of Working India’, was carried out by NIRA which is an Indian consumer finance firm which provides mini loans to low income individuals.
Why Indians Need Personal Loans
The main reasons for requesting personal loans were found to be medical emergencies, children’s education, and wedding expenses.
Of the total amount of loans, 28% were handed out for medical emergencies and 25% for domestic needs such as education, home renovation and wedding expenses.
The reliance on personal loans is high because the salary low income households earn is just enough to cover daily expenses.
However, for unplanned events there is no money left, thus driving 77% of low salaried people to take out unsecured personal loans.
How They Choose Lender And Role Of Moneylenders
When it comes to choosing a lender for loans, 41% respondents said that they consider interest rates for making their decision.
30% were influenced by loan tenures and 20% cited disbursal time as their criteria for decision making.
The report also acknowledged the plight of the young working class who resort to moneylenders for procuring loans.
These moneylenders charge exorbitant interest rates which worsens the debtor’s financial situation.
Main Financial Queries And Distribution Of Expenses
In another finding, 35% of respondents’ main financial queries were about how they can improve their credit score and 20% enquired about how they can pay off their loans faster.
Netbanking was the mode of transaction of choice for 80% of those surveyed whereas only 7% used cash or cheques.
The majority of income, 60% of it, was spent on family expenses, 20% went towards rent, 8% went towards commuting and 12% was kept as savings.
This means there are barely any resources left to dedicate to retirement.
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