Personal loans have been around for years in some form or another – from peer-to-peer lending to home equity loans to instant loans. As lending evolves, personal loans have also changed to better meet the needs of borrowers. Online loan apps have come up and gained popularity due to their convenience and speed. Interest rates and loan amounts have seen their fair share of changes.
So, how is the personal loan landscape going to change going forward?
The third quarter of 2022 is shaping up to be an exciting time for this type of financing. We have put together the top trends to watch out for.
1. More lenders will get into the personal loan game
The popularity of personal loans has been on the rise in recent years and this trend is only expected to continue. As a result, more and more lenders are getting into the personal loan business, offering a variety of terms and rates to borrowers. This increased competition is good news for consumers, as it means that they can likely find a loan that fits their needs and budget.
In addition to traditional loans from banks and credit unions, there are now a variety of online lenders and loan apps that can help you get the money you need.
2. The range of loan products will continue to expand
There’s no doubt that borrowing money has become easier than ever before. When it comes to loans, the range of products available on the market continues to expand. This includes personal loans, instant credit lines, credit cards, and Buy Now, Pay Later amongst other short-term financing options.
3. AI will play a more influential role in personal lending
As we move into the future, it’s becoming increasingly clear that artificial intelligence (AI) will play a big role in many aspects of our lives – including personal lending. There are already a number of loan apps on the market that use AI to help assess a person’s creditworthiness and calculate their loan interest rate. And as AI technology continues to evolve, we can expect this trend to continue.
AI offers a lot of benefits to the loan business. It can speed up the application process and make it more efficient. It can also help assess risk more accurately, which could lead to lower interest rates for borrowers. Ultimately, AI can help make the personal lending process easier and more accessible for everyone involved.
4. There will be more loans from Tier-2 and Tier-3 cities
There has been a steady improvement in digital infrastructure in India. More people have access to quality internet, more people own smartphones, and more people are comfortable using online services. The trend goes hand in hand with improved technology and the rise in online lending.
As the accessibility of personal loans improves, there will be an increase in demand for personal loans from Tier-2 and Tier-3 cities. There was a 2.5 times surge in searches for loans from non-Tier 1 cities than from tiered cities across 2017-2020. Non-tier-I markets have also seen higher growth in per capita incomes and thus, are likely to continue in the future as more and more people in non-tier-I markets become aware of personal loans and the benefits they offer.
5. We will see greater diversity in personal loan applicants
Loan applicants now come from a much more diverse pool. This diversity is reflected in the geographical distribution of loan applicants. In 2020, 71 per cent of first-time borrowers were based in non-metro locations, indicating that lenders are serving a wider range of geographic areas. 49% of first-time borrowers were less than 30 years old and 24% were women. The fact that more young people and women are taking out loans indicates that lenders are reaching a wider audience.
The increased diversity in personal loan applicant profiles is a positive development for the industry. It gives more people the agency to make their own personal finance decisions and encourages greater financial freedom. And that’s something we can all get behind.