BENGALURU: For today’s “Me First” generation, the era of easy and quick loans – made possible by a number of financial technology companies – is proving to be a godsend for international travel and frequent weekend getaways.
Personal travel finance now makes up between 12 and 20 percent of the total loan portfolio of these lenders. For some, it is the largest segment alongside car finance.
According to Abhinandan Sangam, co-founder and CTO of peer topeer lender Finzy, it is mostly white-collar workers between the ages of 28 and 35 who take out these loans. And they take amounts between Rs 2.5 lakh and Rs 5 lakh, mostly for international destinations. The trend encouraged Finzy to work with travel aggregators to help the latter sell destinations like Europe, Australia and South Africa to travelers who would otherwise choose regular hangouts in Goa, Thailand or Sri Lanka. “The cost of the total package of Rs 1.5-2 lakh can be a daunting prospect for young professionals. But when you convert that to an EMI of Rs 3,500 it seems manageable. Our travel partners are very happy too,” says Sangam.
Loans also enable a better overall experience – better hotels, more cash when shopping. Short weekend trips with borrowed money have also grown up. Akshay Mehrotra, co-founder and CEO of lender EarlySalary, says that every time on a long weekend with some state holidays on a Friday or Monday, the company’s website receives thousands of applications. “And the locations would be very close to the applicant’s place of residence. Mumbaikars like to travel to Goa or Lonavala, for example, ”he says. His travel customers are usually 25 to 26 years old.
Rajat Gandhi, co-founder of peer-to-peer lender Faircent, says pre-wedding and post-wedding travel – not including your honeymoon – has become a trend. Mehrotra says people go to places like Thailand for their stag and hen parties before the wedding. “They want to hang out on the beaches with their friends and get the perfect Instagram photo. And they are willing to pay for it, ”he says. Honeymoons make up 8-10 percent of Faircent’s loan portfolio and vacation trips make up a little less than 8 percent.
Peer-to-peer lending platforms connect individual investors with individual borrowers. Participating investors decide for themselves who they want to extend the loan to and how high the interest rate is. In some cases, algorithms make the decisions for an investor. These ventures have an easy format for obtaining credit. Usually it is an online application with some supporting bank and salary documents as well as a PAN number.
Unlike banks, which primarily look at a borrower’s CIBIL score, these companies use a variety of other information, including information available online – such as social media – to assess a borrower’s creditworthiness. Companies say they find many with low CIBIL scores extremely affordable. Sangam says, “We rate our borrowers on more than 130 parameters.”
With EarlySalary, where the financing amounts are lower, the loan can land in the customer’s bank account on the same day. For others, it takes two to three days. According to Gandhi, lenders on the Faircent platform charge between 18 and 20 percent for personal loans. In some cases it can be even lower.