India is home to over a billion people, while most Indians have a bank account, access to organized, timely and reasonably priced loan facilities continues to elude a significant chunk of population.
Estimates indicate that almost 80% of Indians rely on unorganized modes of borrowing when it comes to unsecured personal loans.
The Covid-19 pandemic has further altered various aspects of societies and has resulted in several behavioural and financial changes in the lives of one and all. Even businesses have been badly impacted, especially when it comes to lending. Most banks and lending institutions have become extremely cautious when it comes to issuing non-collateral based loans to individuals. It is not unusual for financial institutions to tighten the purse during these times since they have seen a spike in ‘non-performing assets’ or simply put, percentage of unpaid loans have swelled as a consequence of the economic impact unleashed by the pandemic.
So, what does one do when in need of a helping hand? Well, as it turns out, the oldest form of financing, between friends, family and acquaintances is back with fervour.
3 in 4 Indians are borrowing amongst each other, how does it work?
A survey undertaken by CMIE’s Consumer Pyramids , in Nov 2020, has revealed a decisive change in favour of friends, family and shopkeepers over organized financial institutions when it comes to personal loans. In fact, in urban centres, there has been a 70% jump in the number of people borrowing from friends and family between the year 2019 and 2020.
We all have experienced such transactions at some point, whether reaching out to a friend in college for urgent cash, helping an office colleague in times of need or a lending a supporting hand to a business associate, lending and borrowing amongst known and trustworthy groups is a natural first line of defence for most people when in need of money.
In most such cases, the process is devoid of any paperwork, and loan terms like interest rate and repayment tenure is also decided on a mutually agreeable basis making the process a lot faster than any other form of loans.
Things to watch out for while lending, borrowing amongst friends and acquaintances
Whether you lend money simply to lend a helping hand or to make incremental returns on your surplus cash, it would be advisable to keep the following in mind
- Lend to those who you know well or are part of your circle of contacts
- For lenders- it is fair to charge reasonable interest; for borrowers- borrow with pride
- Keep records so that you do not forget to collect or repay
- Keep it digital- avoid lending/borrowing in cash
- Do not confuse loans with gifts
Is there a platform that can help facilitate such transactions?
Yes, SaveIN is India’s first Social Finance platform, that facilitates lending and borrowing amongst people in their respective contact sets. SaveIN helps in discovery, match making and record keeping of all such transactions and everything is done digitally making the entire process transparent, instant and paperless.
So, the next time you need money, or someone asks you for a little financial hand- start SaveIN