Young Indians Debt problems

Instant Loans: How young Indians can fall into the instant loan debt trap if they’re not careful

Share:

Online Loans, or instant loans as they’re popularly referred to, are primarily unsecured loans that are available online to salaried and self-employed individuals. These loans have palpably ensured a dimensional shift in the Indian credit market, making the experience for customers more seamless than ever. As a matter of fact, instant personal loans have become so popular in the market today that they’ve dislodged traditional personal loan offerings from top banks and financial institutions. 

While instant loans have their share of benefits (we’ll look at them in detail), they’ve also begun to cause evident trouble in some areas. Their benefits have led more people to opt for them, but these very benefits have succeeded in pushing people towards the deep pit of debt.

Whatever said and done, instant loans are perhaps the best thing since sliced bread, and here are the reasons.

Why are young Indians being pushed towards debt because of instant loans?

If we have to understand why young Indians are moving towards the debt trap, we have to look at some very interesting benefits associated with instant personal loans. Note that these very benefits are the reasons why an increasing number of people are opting for them.

To apply for an instant loan is easier than anything that seemed easy till date

Have you applied for an instant loan before? If yes, you’d know how easy it is to get one. And if you haven’t, you’ll definitely know how easy it is.

Most lending institutions allow the entire process to be completed online. Fintech companies, the prominent players in the instant loan space, have constantly been upgrading their platforms to create an unparalleled experience for customers. 

So if you thought applying for an instant personal loan is going to be difficult, you were wrong!

Digital verification for online personal loans – super fast and simple

You don’t have to pay visits to banks or have bank agents come and verify your residential details and collect your documents.

Fintech companies like Qbera that offer instant loans in India, extend the provision of uploading relevant documents online. You can submit your identity documents, your income documents and your documents evincing residential proof, online – through web or mobile platforms, or through the company’s mobile application.

The verification of your documents, and your address, are done digitally, thus saving you time, energy and unnecessary effort.

Easy and accommodating eligibility parameters

Well, this is the part that makes these loans simply hard to ignore. Instant loans, or online loans, do not sport stringent eligibility parameters like how traditional lenders do.

For instance, if you are to take a personal loan from one of India’s top banks (one good thing is that top banks are more accountable and offer lesser interest rates), the process will most likely take over a week’s time starting from the day you apply to the day when the bank sends a representative to your address for verification and collection of documents.

In the case of instant loans, however, Fintech companies offer these loans instantly, making them the more preferred choices for personal loans.

More importantly, Fintech companies like Qbera offer loans to individuals with low credit scores as well, an aspect that is not entertained by traditional lenders. Even with a credit score of 625, you can be eligible for a Qbera loan. On the other side of the spectrum, top banks require you to have a credit score of above 750 in order for you to become eligible for a personal loan.

Here’s what young Indians can do in order to avoid accumulating heavily burdening debt

Treading with caution and avoiding being trapped in debt

For young Indians, credit has definitely become an essential part of their living. As a matter of fact, being given access to credit directly impacts their lives, helping them raise their standard of living and purchase goods, commodities and services that once seemed outside the purview of their budget.  With so many new gadgets and services that are in the offing, youngsters find it convenient to pay for multiple purchases using credit.

The concept of credit has an overwhelming psychological impact as well. Items or services that are seemingly out of reach become well within reach and the thought of paying back rarely acts as a deterrent.

Credit card debt has been rising so massively that individuals rarely realise that they’re on the verge of maxing out their credit cards within no time. Forget that, even before realising that they’ve used almost all of their available credit, they get another credit card. This has become quite a dangerous phenomenon amongst young people.

Not getting immersed in excessive credit card debt

Most people like using their credit card but don’t like the interest associated with it. The first tip to be careful is to stay away from multiple credit cards. Further, maxing out your credit card can lead to perilous problems, including an increase in minimum monthly payments, and an increase in interest payable on transactions and purchases made using your card, both online and offline.

As a young India, you’ve got to make doubly sure that you don’t fall into the debt trap, for reasons that will work to benefit you.

Not applying for a loan just because it is easy to get

Yes, online loans from Fintech companies are easy to get; but this shouldn’t mean that you must get a loan just because you can get one. The problem here is that if you don’t know what you need the money for, you will most likely blow up your money and land in uncalculated debt sooner than you realize.

Keeping a check on the debt to income ratio

This is a golden rule that young Indians can follow in order to stay away from getting sucked into the debt limbo.

For starters, the debt to income ratio (calculated on a per month basis) is the ratio of the monthly repayment burden to the monthly income. Ideally, the monthly repayment amount should not exceed more than 30% of the monthly income – if young Indians are able to maintain this ratio. the fear of falling into alarming debt levels is kept at bay. A figure of 35% is also reasonable, but things can spiral out of control when the ratio begins to exceed 40%.

Share:

Leave a Reply