Digital lending: What you should consider when taking out online personal loans

In recent years, digital lending has become one of the most well-known fintech concepts. This means the use of digital media to apply for, pay for and manage loans.

Lenders are increasingly using digital data to help them make loan selections and build strategic customer relationships. The fintech industry will also deliver faster, cheaper and more engaging better services for the benefit of people due to the developments in digital finance, making it a very productive tool.

Although online personal loans are becoming increasingly popular, many customers still prefer traditional services. However, offline personal loans cannot match the online lending experience in terms of convenience. As a result, city workers are increasingly turning to online personal loans. Most lenders are expanding their operations in other countries due to the rapid growth of digital marketplaces in India.

As a result, online personal loans are more convenient than traditional personal loans and are expected to continue to grow in importance in the future.

However, there are a few things to keep in mind when applying for an online personal loan:

Analyze carefully: While digital loans are so easy, it’s important to use them intelligently to improve your financial status, rather than just buying things and then struggling to pay the EMIs. You should ask yourself, “How much do I need?” and “How much can I afford?” before applying for a loan.

Check with a partner NBFC (Non-Banking Financial Company) to see if they are registered with the RBI. Almost all online lending applications use a non-bank financial entity to issue loans. It is important to know which NBFCs are participating and to check the details on the RBI’s website.

Check the important terms like interest rates, processing fees, prepayment fees/penalties, term, repayment method, etc. that are provided up front.

Watch out for hidden fees like processing fees, prepayment penalties, foreclosure fees, GST, and other expenses.

All of these fees do not need to be disclosed upfront, so read the contract carefully.

Verification before documents are transferred: Ensure that the manager has the correct identification documents to establish the validity of the credit institution during the physical KYC verification. To avoid identity theft, wait for verification to complete before revealing important papers.

Get Good Credit: Having good credit on top of your income will help you get a personal loan online with your chosen interest rate and term. Because a low credit score indicates a poor payback history, banks will be reluctant to give you a loan. Therefore, it is important to pay off all your debts and overdue credit card bills before applying for a new loan.

A borrower with several loan applications in his credit bureau is considered a risk candidate. Lenders are more likely to reject loan applications from such borrowers; Therefore, it is best not to apply for many loans at once.

Say No to Unauthorized Sources: As the popularity of the internet has grown, so has the number of online scammers and scammers. Unverified loan applications that require personal information such as your address, PIN, and bank account number should be avoided.

There has undoubtedly been a surge in online fraud during the Covid-19 pandemic.

However, as long as the online lender is trustworthy, personal loans from online lenders are just as safe as loans from major banks.

A reputable lender would normally check your creditworthiness, disclose the interest rates and terms, and ensure that the loan will not affect your finances before processing your application, whether online or offline.

(The author is Chief Executive Officer and Founder of PayMe India, a fintech digital lending company.)

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