Here’s how debt relief platforms can help millennials, Gen Z achieve financial freedom

Access to credit has eased considerably. Millennials and GenZ who are riding high on their aspirations fall into a debt trap by overspending via credit cards, paying the minimum due or defaulting on their debt obligations.

“Millions of Indians are walking the financial tightrope every day. One misstep, one indulgence, and one emergency are all it takes to fall off and be snowed under bills, outstanding payments, late fees, and emotional stress,” says Ritesh Srivastava, Founder and CEO of FREED.

Why does one get debt-trapped? The rise of digital lending has made credit easily accessible to Indian borrowers; coupled with factors like an increase in consumption loans, poor financial literacy, inflation, and a decline in household savings, many were making ends meet by availing of unsecured loans, which led to many being unable to honour their monthly obligations. In fact, according to the RBI Financial Stability report released in June, unsecured retail loans increased from 22.9 per cent to 25.2 per cent, and secured loans declined from 77.1–74.8 per cent.

Here, debt relief platforms have become critical components in the lending ecosystem in India.

What is a debt relief platform? The relief platform or management is all about identifying the real problem of the borrower before devising a solution or offering an alternative. It understands the ready threat that easy access to credit poses and leverages its expertise to help such borrowers who show a clear intent to resolve their debt and regain their creditworthiness.

“Borrowers fall prey to the debt trap by borrowing more than they can afford to repay; others juggle debts, and yet others live pay check to pay check, only serving their high-cost debts,” says Srivastava. “I firmly believe that delinquent borrowers who are filled with intent, however, find themselves out of favour with the lending institutions deserve a second chance,” he added.  

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How does a debt relief platform help? It offers borrowers a fair, transparent and affordable option to eliminate debt. The solutions offered by debt relief platforms are aimed to be simple, effective, and easy to use to help borrowers achieve their financial freedom.

It helps instil financial discipline in the borrowers, helping them manage their debts efficiently while handholding them throughout their debt relief journey. “Debt relief platform offers protection and much-needed support to borrowers, along with closure on loans to lenders of otherwise overleveraged and vulnerable borrowers. This is a huge win-win proposition for lenders and borrowers,” says Srivastava.

Why is it important? While trying to balance debt repayments, borrowers may realise they cannot take it any further. External pressure from the collection agencies continues to build. At this stage, a debt relief platform can help resolve one's debt burden. Srivastava says, "The main scope of work for a debt relief platform is to present custom solutions to meet the individual's need for debt management, in the process building creditworthiness, helping individuals regain their financial freedom and creating awareness on debt."

Thus, in due course, the borrower realises the importance of financial discipline and better understands how to manage his debt.

BT’s Take: As consumption loans continue to surge, aiding India's rapidly growing economy, debt relief firms can play a pivotal role in promoting financial literacy, aiding credit re-inclusion for marginalised borrowers and creating an ecosystem that fosters responsible borrowing and cautious lending.