Borrowing loans was an option which most Indians from previous generations only considered while making major life decisions such as buying a home, studying abroad or paying for a medical emergency. With time loans for cars and bikes were normalised for the urban middle class seeking a better lifestyle, and now quick loans are available for everything from smartphones to vacations. But while this does ensure increase spending power among consumers and ensure cashflow, personal debt in India has been soaring as people may be borrowing too much.
As higher interest rates make EMIs costlier and day to day expenses go up, turns out millennials are having trouble managing their debt. From loan repayments eating up savings, to harassment from creditors or loan recovery agents, high personal debt could dirupt life as millennials are constantly scrambling to maintain positive cibil scores.
To relieve young consumers from some of the burden as they manage expenses along with work-life balance, an innovative startup is offering help with debt management. Single Debt is India's first and only debt management firm, which offers to negotiate alternative repayment plans for individuals and makes sure they are treated fairly.
This is the kind of mechanism is available for corporates who can deploy representatives to work out debt settlement with banks for larger loans, but its a luxury common borrowers can't afford.
What is causing the surge in millennial debt?
According to Single Debt's founder Harish Parmar, "One of the biggest reasons for millennials' debt problems is the high cost of education. Many Indian students take out loans to pay for their studies, but they find it difficult to repay these loans after graduation due to the lack of job opportunities or low salaries."
Although inflation has been cooling down for the past couple of months, prices of food, housing and healthcare maintain pressure on millennials moving out to Indian city, especially after the pandemic. This has also severely affected the loan repayment capacity of young Indians, who were already accumulating high personal debt even before the pandemic.
Parmar feels that, "Banks and financial institutions have made it easier for people to get loans and credit cards, making it tempting for millennials to spend beyond their means. This, coupled with the lack of financial literacy, has resulted in many millennials accumulating significant amounts of debt."
This is why Single Debt also offers courses in financial literacy to make sure millennials don't keep falling into debt traps while managing their loans for them.
So how exactly does Single Debt work to ease a client's debt woes?
Firstly, they conduct a thorough review of their clients' accounts to verify that the creditor is treating them fairly and complying with consumer protection laws.
Secondly, Single Debt negotiates with creditors on behalf of their clients to establish a more manageable repayment plan, which can reduce the financial burden on the clients and ensure that they are treated equitably.
Thirdly, Single Debt educates their clients about their rights and connects them with resources such as lawyers and paralegals to assist them in navigating their financial situation.
Fourthly, Single Debt monitors communication between clients and creditors, offering a service that allows clients to redirect creditor calls to a paralegal to prevent harassment or threats. If any inappropriate communication is detected, Single Debt takes action on behalf of their clients.
Finally, Single Debt provides emotional support to their clients and refers them to additional resources such as counselling or support groups, recognizing that being in debt can be a stressful and emotionally challenging experience.
Speaking about the legal protection that Single Debt promises, Parmar further adds that, "Our services include the option for clients to redirect all their creditors' calls to our paralegal team, freeing them to focus on improving their financial situation without being inundated with calls. If a creditor becomes abusive or harasses a client, we can step in and report them to the appropriate authorities."
Solutions oriented approach
Describing how they also ensure that the client follows due process, he says, "We stress the importance of complying with relevant laws and regulations while pursuing debt collection activities. We advise and point them to resources such as training materials, workshops, and webinars to help them understand the ethical and legal aspects of debt collection."
Single Debt does rely on lawyers and resources to take legal action in case of unfair treatment used against borrowers, but it first focuses on solutions. About its mechanism, Parmar further elaborates that, "If any of the creditors are reported to be engaging in unfair or unethical debt collection practices, we take immediate action. We inform the creditors and work with them to resolve the issue."
Going beyond short-term solutions
Although its primary focus is on helping millennials who approach Single Debt with their debt problems, Parmar says that the firm goes further and offers, "credit monitoring services by financial institutions or credit bureaus to help individuals track their credit scores and detect errors or fraud. Financial apps can also be used to manage budgets, track expenses, and monitor debts, providing personalized recommendations based on the individual's financial goals and spending habits."
Since this is the first of its kind service for India's millennials, the firm also relies on feedback to tailor its offerings according to their requirements.
The focus isn't only on protecting borrowers against creditors, the idea is to cooperate with lenders and work out ethical solutions to ensure that young consumers aren't bogged down by a personal debt burden.