Online personal loan up to Rs 25,000 grew 23 times in 3 years: Google-CIBIL study

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Over the past few years, online transactions have been rising in the country and with the onset of the pandemic, online and digital financial transactions have emerged as the king.

Like other transactions, application for loans are also made online. Within minutes of applications, loans worth lakhs of rupees are credited to customer accounts.

Rising online

Personal loans up to Rs 25,000 have risen 23 times between 2017 and 2020 over the online medium. Besides, online medium accounts for 37% of the total online loan book in Q4 in calendar year 2020, a joint study by Google and TransUnion CIBIL has said.

A joint report by TransUnion CIBIL and Google titled “Credit Distributed” released on June 10 provides insights into the increasing trend of consumers for purchasing credit products on the internet. This research report combines the power of data based on credit related searches on Google along with TransUnion CIBIL’s credit information insights.

Signalling a shift from traditional channels to online, this report identifies multiple new and under-tapped segments of credit demand that are distributed across loan product, geographies, CIBIL score-based risk segments, end-use requirements and borrower profiles.

Small is big

The report identifies the significance of small ticket loans i.e. below Rs 25,000. These loans are characterised by searches for ‘phone on loan’, ‘laptop on EMI’ and ‘Mahila loan’.

The share of these loan disbursals amongst all personal loans has gone up from 10% in 2017 to 60% in 2020, reveals the study.

With disbursal speed and convenience being the hallmarks of these loans, the digital-first sellers have the largest share in this category with 97% of all personal loans disbursed by them being under Rs 25,000.

Interestingly, small loan borrowers exhibit higher loyalty – repeat customers rose 42 times in 2020 compared to 2017.

The trend

India’s credit market grew at a pace of 18% in 2020 against calendar year 2019. Total loan market is around $61,300 crore till December 2021, the report says.

In Google search ‘Car Loan’ dominates the trend with 55% of all loan search related to it. ‘Home loan’ comes in second position with 22% share and ‘Phone loan’ stands third with 10% share in the half year beginning July 2020.

Personal loan stands at 4th position with only 8% search share in the same period.

Shopping for personal loan online grew by 1.7 times in 2020 compared to 2017, the report said.

Beyond urban India

Credit demand from non-metro locations is rising with 77% of all retail loan enquiries on the TransUnion CIBIL bureau originating from tier-II cities and beyond in calendar year 2020. Also, 70% of total credit enquiries are from existing borrowers outside tier-I cities.

Alongside, loan-related searches from tier-II and tier-III locations grew by 32% and 47% respectively in 2020 over those for 2017.

The study also reveals that 76% of borrowers take at least 14 days to take an online loan. As many as 49% of new-to-credit retail borrowers are less than 30 years old and 71% of them are located in non-tier I cities.

Increasingly more and more women are shopping for loans online. Almost a quarter – 24% — of all the customers are women.

Expert take

“We have collaborated with Google India to combine the power of online credit-related search data with credit enquiry data from TransUnion CIBIL to create this rich research report. This has a powerful reflection of consumer demand, intent and approach to accessing financial opportunities. Consumer credit demand has undergone a paradigm shift over the last few years, with the post-pandemic circumstances having further accelerated this change, here that trend is being highlighted,” said Rajesh Kumar, MD and CEO of TransUnion CIBIL.

“In India’s post Covid-19 journey back to growth, access to credit is crucial. With more and more consumers now coming online medium, the demand for credit has also dispersed and moved outside of predictable medium. End-to-end tech-enablement by lenders to create a holistic digital atmosphere in the credit segment of the country,” said Bhaskar Ramesh, director, Google India.