Digital loan: what to remember when taking out personal loans online
In recent years, digital lending has become one of the most important fintech concepts. It refers to the use of digital media to request, pay and manage loans.
Lenders are increasingly using digital data to help them make lending choices and strategically retain consumers. The fintech industry will also provide better services for the benefit of people in a faster, more cost-effective and more attractive way thanks to developments in digital finance, which will make 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 experience of online loans in terms of convenience. As a result, city workers are increasingly turning to online personal loans. Most lenders are expanding their operations to other countries due to the rapid growth of digital markets in India.
As a result, online personal loans are more convenient than traditional personal loans, and they are expected to become more widespread in the future.
However, there are a few things to remember when applying for a personal loan online:
Analyze carefully: Despite the ease of digital loans, it is essential to use them wisely to improve your financial situation rather than just buying things and struggling to pay 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-bank financial company) to see if they are registered with the RBI. Almost all online loan applications use a non-banking financial entity to grant loans. It is essential to know which NBFCs are participating and check the details on the RBI website.
Check important terms and conditions such as interest rates, processing fees, prepayment charges/penalties, term, repayment method, etc., which are specified in advance.
Keep an eye out for hidden charges such as processing fees, prepayment penalties, foreclosure fees, GST, and other expenses.
Not all of these fees need to be disclosed up front, so read the contract carefully.
Verify before transferring documents: Make sure the executive has the correct ID documents to establish the validity of the lending institution during physical KYC verification. To avoid identity theft, wait until verification is complete before revealing vital papers.
Maintaining a good credit score: Having a good credit score, in addition to your income, will help you obtain a personal loan online with the interest rate and term that you choose. Because a low credit score indicates a poor repayment history, banks will be hesitant to give you a loan. Therefore, it is essential to pay off all your outstanding debts and credit card bills before applying for a new loan.
A borrower with multiple loan applications on their credit report is considered a high-risk applicant. Lenders are more likely to reject loan applications from these borrowers; therefore, it is best not to apply for multiple loans at once.
Say No to Unauthorized Sources: As the popularity of the Internet increases, so do the number of online cheaters and scammers. Unverified loan applications that ask for personal information such as your address, PIN, and bank account number should be avoided.
During the Covid-19 pandemic, there has undoubtedly been an increase in online fraud.
However, as long as the online lender is reputable, personal loans from online lenders are just as safe as loans from major banks.
A reputable lender, before processing your application, whether online or offline, will normally review your credit, disclose interest rates and terms, and ensure that the loan will not harm your finances.
(The author is the Managing Director and Founder of PayMe India, a fintech digital lending company)
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