The growth of fintech in India has led to the adoption of the concept of digital lending. Digital lenders have eased the process of loan applications by simplifying various eligibility criteria. Here are key things you need to know before applying for a loan online.
Steps To Be Taken To Apply For A Loan Online
Select the “Right Loan”
The right loan is one that suits your requirement. While applying for a loan, you must be mindful of the
The focus must not only be on low interest rates and hassle-free repayment structures but focus on reading the fine print.
Take help of an Monthly Instalment (EMI) calculator
The EMI calculator provided by online lending platforms has emerged as a powerful tool for customers. It enables one to understand and draw an estimate of the monthly repayment amount, the payback tenure and the total amount one can afford to pay. It also gives you a clear picture of the loan amount you are eligible for, depending on an individual’s monthly income and expenses, i.e. the overall cash flow.
Collate all documents
Apart from the application form for the loan, you need to put together a set of a few other documents to complete their know-your-customer (KYC) process. The KYC process is a personal identification process and is mandatory for credit companies to know all details of the customer better.
Usually, the documents required for a personal loan include:
Income proof like salary slips or tax returns
Age proof such as passport, Aadhaar card or birth certificate
Address proof like electricity bill, telephone bill or ration card
PAN card, and proof for photo identification
If you are interested in a business loan, then some additional documents such as business continuity proof, ownership proof, goods and services tax (GST) filing details, and credit score may be required
Fill the application form
To fill the loan request form, all one has to do is visit the lender’s website. Select the type of loan and hit ‘apply now’ on the bottom of the screen. An application form, asking for details such as full name, date of birth, and contact information, among others, will pop up. Once you have filled in all the necessary information, you can submit your application form.
What Makes Applying For Loans Online Convenient
This was usually the tricky part where one was expected to wait for weeks and fill multiple forms. When applying online, the possibility of this wait getting shorter is much higher. Most online lenders boast of communicating with prospective borrowers within 5-10 minutes of them approaching. The verification is often done immediately, and the subsequent information of approval is passed on. If approved, some lenders are able to disburse the loan amount within a span of 72 hours.
Traditional banks and financial institutions require applicants to submit a long list of documents to consider granting a loan. Arranging all the paperwork is sometimes tedious. Digital lending platforms cut this hassle and instead ask for documents that need to be submitted digitally or verified through real time service API integrations. Customers have to scan and upload these documents to get their loans approved and get them verified through sophisticated fraud filters. This method works for digital-savvy consumers.
A key difference between conventional lending institutions and technology-driven platforms is the flexibility of the credit amount offered to borrowers. In general, a traditional financial company considers any loan amount below INR 1 lakh risky. Fintech companies based the evaluation of unsecured loans, which refer to loans granted without any collateral, on the creditworthiness of their customer. Such loans range between INR 25,000 to INR 5 lakh or even more.
As the customers are increasingly inclined towards digital lending platforms for attaining convenient loans, the market has witnessed a mushrooming growth of such organisations. Even though the presence of a plethora of options tends to spoil one for choice, people must be cautious while selecting their digital lender. Before you make your decision, here are some
Precautions To Take Before Applying For A Loan Online
Compare interest rates
Each lending company offers different interest rates, depending on the type of loan, the capital and the loan duration. Before zeroing in on an option, borrowers must compare and evaluate to opt for the lowest rates. If you are unable to do it on your own, several websites can help you find a loan provider that meets your requirements.
Take note of all costs
Loans involve numerous hidden costs, which can trouble the borrower in the long run. It is essential to read the fine print and be aware of every other additional charge one might be asked to bear. Some of these costs come in the form of the processing fee, prepayment fee, or late payment fee. By knowing all other ancillary charges that the lender has included, customers can draw an estimate of the expenses they have to handle during the duration of their credit period.
Check the authenticity
With a sudden rise in the number of digital lending platforms, the risks of fraudulent activities have also increased. Before relying on an online lender, individuals should check the legitimacy of the platform. One must steer clear from gimmick offers and false advertisements.
For instance, some lenders offer their borrowers a floating rate of interest. These rates might seem low compared to others in the beginning. However, they gradually grow to become an amount so big that it leads to unnecessary draining of your financial resources. Some lenders even hide the charges in the fine print. Thus, a thorough check is a must before selecting your digital lending platform. One should always opt for those lenders who are transparent and clearly state their rates, charges, and other formalities.
Read all documents carefully
Individuals should focus on reading the documents provided by the lender. These documents usually entail information such as terms and conditions, repayment rules, interest rates, additional charges, and fees, among others. If you fail to understand what each of these conditions means, it might lead to unnecessary trouble in the long run. One should trust only those lenders who provide their borrowers with all essential information in detail and well in advance.
Avoid submitting your loan application to multiple lenders
Every time a customer submits a loan request, the lender checks on the borrower’s credit report to ascertain his or her creditworthiness. Such requests are considered as hard enquiries and are included in the applicant’s credit report. These additions can bring down one’s entire credit score by several points. If multiple such enquiries arise over a short period, they can adversely impact your overall creditworthiness.
To avoid such a situation, check online financial marketplaces to gauge the best loan opportunity based on the borrower’s current score and capacity. Since credit score requests by these marketplaces are deemed as soft enquiries they will not hamper your credit score.
The transition from offline to online loan application and approval has been largely driven by varied technological disruptions. Technology has allowed the entire process of lending to become more convenient, easy, transparent, and trustworthy.