Loans: What’s The Bottom Line For Consumers?
- 71 percent of loan customers sought advice from their friends and family before finalising the deal
- one out of every four customers did not take a loan from their primary bank because of lengthy processes, higher interest and processing rates
- 3 out of 10 consumers avail of loans earlier than planned because of promotional offerings
- as much as 75 percent of consumers approached three different banks/NBFCs while researching loan products
In the age of consumerism, where almost everything is available on credit and can be repaid in monthly installments, nothing seems unaffordable to the urban Indian consumer. Considering that the Indian loan market is expected to grow at a compound annual growth rate (CAGR) of nearly 19 percent between 2011 and 2016, financial institutions should pay attention to the journey that the average consumer embarks on when securing a new loan.
Declining interest rates, faster processing times, income tax rebates, reduced paperwork, flexible repayment options and attractive schemes have all contributed to significant growth in the Indian loan market. And among the various loan types, home loans account for the lion’s share at around 46 percent.
As per a recent study conducted by Nielsen to understand the process of availing loans, we looked at the customer’s pre and post purchase journey.
Getting It Right
Since loans are long-term commitments, consumers rely on their most trusted associates before taking the plunge. Hence, they reach out to their Friends & Family (71%) and Banks (68%) to help steer their decision making.
While the discussion with friends and family mostly revolves around the loan amount and interest rate, 66 percent of consumer queries centre around choosing the bank, dealer or non-banking financial company (NBFC) that will issue the loan. This implies that consumers like to explore options in the market even if they trust their primary banking partner.
Our study found that promotions play a key role in attracting customers to loan products. In fact, 31 percent of consumers avail of loans earlier than they planned because of promotional offerings. Comparatively, more than two out of five (44%) consumers wait for better deals before availing a loan.
While most of the details pertaining to loans are closed beforehand, some aspects, however, are often left undecided in consumers’ minds. This is exactly where the influencer steps in and can make final alterations and recommendations, and this is where the loan can get a little more customised to meet one or more product parameters.
We found that 45 percent of respondents changed the bank or NBFC that they had originally planned to take a loan from. Similarly, nearly two out of five (38%) changed the loan amount they had initially intended.
Key Channels For Loans
Banks continue to be the largest channel when it comes to handling consumer loans. It’s also interesting to note that the internet plays a significant role when it comes to vehicle loans.