Getting a personal loan online to weather the current financial crisis could prove to be a little tricky as many fintech digital lenders are particularly cautious, especially with new borrowers.
Companies note that while personal loan demand has declined during the current lockdown, the extended moratorium on fixed-term loans through August 31 also makes them more cautious in their policies.
Problems on the demand and supply side
According to Gaurav Chopra, founder and CEO of IndiaLends and President of the Digital Lending Association of India, there have been problems on both the demand and supply sides since the outbreak of the Covid-19 pandemic.
“Lenders are concerned about people’s ability to repay loans. Much of the bank lending used to be physical, but that has dried up. The six-month moratorium also called into question the extent to which borrowers can repay. Also, many NBFCs have not been granted a moratorium by their banks, ”he said, adding that demand is also subdued as consumers do not need personal loans for holidays and weddings.
The demand for personal loans comes primarily from those in financial distress due to job losses, salary cuts, and medical or educational expenses.
A survey by IndiaLends found that 72 percent of respondents would be willing to opt for a personal loan in the near future to cover high-profile expenses such as debt payments, covering vital, medical and educational needs, and home repairs and renovations.
“Most lenders are cautious. It is easier to evaluate existing customers while new customers are difficult to evaluate, “said Chopra, adding that it is the case for banks, NBFCs and fintechs.
Madhusudan Ekambaram, CEO of KreditBee, said by early March, 75,000 to 80,000 new loan applications had been received and 45,000 loans had been granted daily.
“We look after our existing customers, but not really new ones, as we have decided to wait until August-September to increase lending after the moratorium has ended. Many lenders have put their tightening measures in place, despite the strong demand for personal loans to sustain long-lived consumers, “he said, adding that due to the extension of the moratorium, credit insurance standards are now being tightened even further by both banks and NBFCs Evaluation metrics are re-examined.
The buffers for repayment capacity will change quite a bit in the future, he noted.
Anuj Kacker, co-founder of MoneyTap, also said that the second moratorium presented lending institutions with new challenges. “Initially, the idea was to start lending from June 1st, when the moratorium ended. But if someone has taken out a moratorium due to cash flow problems, the lender will not be able to give the borrower any more money until their moratorium period expires, ”he said, adding that despite the increased demand for credit, lending has become slow.
Existing customers are borrowing from their line of credit, he said, noting that borrowing was at lower levels as spending fell during the lockdown.