The Importance of Personal Loans in Middle-Class Families

With rising living costs and stagnant incomes, personal loans have become a popular financing option for many middle-class families. A 2023 survey revealed that 67% of respondents have used personal loans to meet their essential needs. 

Given that most participants were from the middle-class segment, this highlights the growing appeal of personal loans in this demographic. But what makes personal loans the preferred option? How do personal loans help middle-class families?

In this article, we’ll discuss the importance of personal loans for middle-class families.

Understanding Middle-Class Financial Needs

The PRICE (People Research on India’s Consumer Economy) report defines the middle class as individuals earning between INR 5 lakhs and INR 30 lakhs per year. Despite being seen as the backbone of the economy, families within this category often face significant financial challenges. 

Rising inflation, stagnant wages, and unexpected medical expenses put considerable strain on their budgets, with savings alone often insufficient to cover the costs. Personal loans can serve as a crucial financial buffer in such situations.

Personal Loan Benefits for Middle-Class Families

Personal loans are often an attractive option for middle-class families due to the following benefits:

• Lower Interest Rates: Compared to credit cards, personal loans typically offer lower interest rates, making them a more cost-effective borrowing option.
• Quick Access to Funds: Personal loans often provide quick approvals and disbursals, depending on factors such as applicant eligibility, loan amount, and lender policies. 
• Fixed Monthly Payments: With fixed EMIs, borrowers can easily plan their finances, knowing exactly how much to pay each month.
• No Collateral Required: Unlike secured loans (e.g., car loans), personal loans do not require the borrower to pledge assets as collateral to secure funds.
• Flexibility in Usage: Whether it’s for a wedding, medical expenses, or education, personal loans can be used for a wide range of purposes.
• Debt Consolidation: Personal loans can be a useful tool for consolidating multiple high-interest debts (e.g., credit card balances) into a single, potentially low-interest loan.

Why Do Middle-Class Families Need Personal Loans?

What are the crucial expenses for which middle-class families need personal loans? Let’s explore below:

• Meeting Immediate Financial Needs: Situations such as medical emergencies or unexpected job loss can significantly strain family finances. Personal loans provide quick access to funds when savings are insufficient to cover such costs.
• Higher Education Investment: As higher education costs continue to rise, personal loans can help bridge the gap between savings and actual expenses. Working professionals may apply for personal loans to secure quality education or complete a skill-based course.
• Home Renovations or Repairs: Urgent repairs or the need for home improvements – such as fixing a roof, plumbing issues, or renovating a kitchen – can strain a family's budget. Personal loans can provide the necessary funds to keep a home in good condition without depleting savings.
• Wedding Expenses: Weddings are cherished occasions in India. The expenses can include the venue, accommodation, catering, and attire, making personal loans a helpful tool for covering the costs.

Personal Loan Eligibility Requirements

The general eligibility requirements for personal loans include:

• Income Requirements: A steady monthly income, usually ranging from INR 20,000 to INR 25,000 or more, depending on location and lender policies, is essential.
• Credit Score Considerations: A CIBIL score of 750 or above is generally required.
• Age and Employment Criteria: Applicants should be between 22 and 65 years old, with at least one year of work experience and a minimum of six months in their current job.

*Please note that these are only basic criteria. The final eligibility will depend on several factors including the lender’s policy at the time of loan application.

Conclusion

When used wisely, personal loans can be a valuable tool for middle-class families to manage life’s unexpected expenses and maintain financial stability.

If you’re looking for reliable financial solutions, SMFG India Credit offers personal loans of up to INR 30 lakhs*, with flexible repayment terms ranging from 12 to 60 months. Our competitive interest rates start at just 13%* per annum. Check your eligibility and apply online today with minimal documentation.