Our Terms & Conditions | Our Privacy Policy
India traditionally has been an underpenetrated market, where access to formal credit has been a challenge for large parts of the population. However, that is changing, and at a rapid pace. Credit is becoming an increasingly integral part of life, with consumers across the country using new-age products like pay later and short term personal loans to meet varied needs.
A recent analysis by Paisabazaar showed a startling fall in age of availing the first credit product with each passing generation. The study revealed consumers born in the 1970s availed their first credit product in their mid to late 30s or even in early 40s, while those born in the 1990s typically began their credit journey in their mid-20s. Youngsters born after 2000 are consuming credit at an even earlier age and borrowing at quite a frequent pace.
The generational shift indicates both ease of access and evolution of young India’s mindset. Credit is no longer reserved only for important goals and life events, but is part of the lifestyle now. Youngsters today are comfortable and confident of using credit for their aspirational and daily needs.
While easing access brings inclusiveness and enables the industry to cater to the underserved segments, it also warrants the need for higher awareness and responsible borrowing. Unchecked borrowing and overleveraging by large segments can lead to serious consequences both for the consumer and the industry.
Understanding responsible borrowing
Responsible borrowers are able to use credit to elevate their financial life, rather than impacting it adversely. The key principles of responsible borrowing are to remain mindful of your need to borrow, consider affordability before taking any new credit, take informed decisions, maintain strong credit health and stay aware of the impact of each credit decision you make – which means you need to:
o Distinguish between needs and wants: With access becoming seamless, one can borrow today with a click of a few buttons or swipe their credit cards, to meet any lifestyle and aspirational need. To ensure your debt burden does not spiral out of control, borrow judiciously, and avoid impulsive decisions to take new credit that can hurt your financial future.
o Gauge your ability to repay: Each new loan adds to your debt burden, where you don’t just need to pay the original principal borrowed but you do it with significant interest costs. A cardinal rule when you borrow is that you should have the ability to repay the loan, without putting too much stress on your finances. Unchecked borrowing often leads to unmanageable debt that can have alarming implications on your credit health.
o Compare before availing credit: A big mistake many borrowers make is not to compare various offers available to them, before availing credit. Since taking a loan comes with interest cost and other charges, it is crucial to compare all options available, and choose the most viable and cost-effective one.
o Maintain strong credit score: Your credit score is the report card that includes all the details of your credit performance from the past. A strong credit score would fetch you the best offers on loans and credit cards, while an unhealthy one would become a serious roadblock to your ability to borrow, impacting future needs and life-goals like buying a house.
o Stay aware of long-term impact: Each credit decision you take has an impact on your credit health, some of them can have long-term repercussions. Irresponsible actions like being irregular with your EMI repayments, having negative accounts or settling an unpaid account can strongly dent your credit health over the long run.
Responsible lending is all about being thoughtful and conscious of your credit actions and to ensure consistent good credit behaviour to build a healthy credit profile. Exercising restraint and avoiding rash decisions to take credit should ensure stable financial standing in the long-run and enable you to borrow with confidence for all needs and life-goals.
Facebook
Twitter
Linkedin
Email
Disclaimer
Views expressed above are the author’s own.
END OF ARTICLE
Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.
Aggregated From –
Comments are closed.