Small loans increase 2x to 7x in March-May thanks to strong millennium demand

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Chennai: Short-term Covid-related spending is driving demand for smaller loans, with lenders seeing a two to seven-fold increase between March and May.
The outbreak of the second wave of the Covid-19 pandemic led to a series of new reasons for short-term loans and small loans such as emergency medical expenses, the purchase of new health insurance policies or existing supplements, registration for further training courses, rental deposits. , etc.
FREO co-founder Kunal Varma said people’s loan requirements have changed. For example, there are no takers for a travel loan while loans for medical emergencies are on the rise. “We have massive adoption of small loans with a 30% increase in the past six months and much larger growth in the past year,” he said. Its average ticket size for short term personal loan products is Rs 25,000 and less than Rs 5,000 to buy now and pay later. These loans come under scrutiny as extra sweat in the system can increase defaults.
Varma added that people are more comfortable spending on lower value transactions, especially after prolonged lockdowns during the second wave of Covid. Akshay Mehrotra, co-founder and CEO of EarlySalary.com, said: “We have seen good demand in the second wave of Covid, as monthly loan disbursement returns to pre-Covid levels of Rs 130 crore. The demand for new loans is equal in metropolitan and non-metropolitan cities, as financial pressure is felt in all cities. ”
With changing demand and consumer risk profile, rates have become more dynamic in nature than fixed in nature Yogi Sadana, CEO of Mumbai-based fintech CASHe, which offers instant loans online up to Rs 4 lakh for professionals working up to 18 months says there has been a buoyancy in the way the interest rate charged on loans. The ROI dynamically goes from 0% on BNPL loans to 2.75% pm depending on the product and the risk profile of the borrower. The peer-to-peer lending platform LendenClub, which offers short-term instant cash loans for salaried people ranging from Rs 5,000 to Rs 10,000 and offered for a term of 1-3 months, says demand for small loans has doubled since March 2021.
A report from Google and TransUnion CIBIL pointed out that over 60% of all personal loan arrangements were less than Rs 25,000 in note size as of Q42020.

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