The Post-Pandemic Surge in Availing Credit

The pre-pandemic world was looking forward to a growth in credit by 8-9%. While the actual numbers have changed in the successive months, the credit demand has been on the rise despite the uncertainty that the pandemic introduced in our lives of several people.

During the pandemic, millions of people experienced an array of financial stress stimulators like job losses, pay cuts, etc. While some forms of credit have seen a decline, demand for personal loans have surged and interestingly not by the audience you might expect from. 

While a pre-pandemic world saw individuals purchasing higher personal loans driven by one’s desires, the post-pandemic world is seeing the changed reasons for taking loans. With a surge in job-losses and pay cuts across the country, the customers focus is now on need-based loans rather than want-based loans. 

The specifics of who borrows, how much, and why, have changed in a post-pandemic world. According to CRIF Highmark, there was a 23% growth y-o-y basis in the number of personal loans taken by women for the first 9 months of 2020-21. A survey conducted in 2020 by a Digital Lending Platform, CASHe, states that personal loans were majorly borrowed for medical emergencies and expenses (home renovations taking up a chunk of them for several customers), followed by individuals (16%) who availed loans for credit refinancing itself.

What’s further interesting is that a report – Millennial Loan-o-Nomics’, which analyzed an active pool of over 4 lakh loan applications, reveals that the larger customer base of all loans applied for were millennials – aged between 30 & 40 years of age. They constituted no less than 51% of all loans applied for. Further, 41% of these individuals fell under the income bracket of 10,000/- to 25,000/- per month, while a year ago, the majority of the borrowers earned close to 25,000/- to 50,000/- a month.

Ever since the uncertainty cast by the pandemic has struck the global economy, customers have a growing affiliation to short-term, smaller ticket sizes as opposed to long-term and larger ticket sizes when opting for a loan.

While the economy recovers from the turmoils of the pandemic slowly, customers, more specifically, millennials are pushed towards easier credit transactions. They are spoilt for options with the emergence of the ‘new kid of financing’, Fin-techs. These digital lending platforms are serving the complex demands of the millennials with utmost ease and efficiency. 

The question to ask is how will the stringent traditional loan creditors operating in the secured lending space respond to these changes in the landscape? Will we see a response from the ‘big brothers’, the Banks, or the younger one get away with the market?