Top 5 ways to boost your chances to get digital personal loans in India

By Edil Corneille

It is the age where financial technology (FinTech) has enriched the lives of individuals in many aspects among which access to loans, digitally, has improved the scope for financial inclusion. Overall, digital lending amounted to about USD 75 billion in India in the financial year 2018, according to Statista, and is expected to reach USD 350 billion by the financial year 2023.

It is imperative that with the advancements in technology, customers need to be cautious and aware of fraudulent unauthorised lending platforms. The Reserve Bank of India (RBI) has cautioned the public against these unauthorised platforms who charge a higher interest rate, hidden charges, and have obnoxious and imperious recovery methods for the loans. The recent spurt and popularity of online lending platforms/mobile lending apps have raised certain serious concerns which have wider systemic implications. Against this backdrop, a Working Group (WG) is being set up by the RBI to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place.

A personal loan is a loan that one can borrow for various reasons. These are typically unsecured loans and require minimal documents and no collaterals. However, the eligibility of the loan amount depends on the credit score history of the borrower. The amount borrowed as a personal loan needs to be repaid with a fixed interest rate over the loan tenure. Personal loans are one of the fastest, easiest, and flexible loan options and thus are an attractive option for many borrowers. Let’s look at some of the ways that help individuals improve their chances to get a hassle-free personal loan digitally.

1. Credit score: Credit Score is a significant indicator of the creditworthiness of the borrower. The lender’s decision to approve a loan relies heavily on this parameter. Hence it is essential to maintain a good credit score. Many advantages such as improving one’s chances of loan approvals and better interest rates can be availed with a good credit score whereas a bad credit score does the exact opposite.

2. Repayment plan: It’s a smart idea to plan one’s repayment of the loan in advance as it will avoid any late payments and penalties. While planning the repayment, the loan tenure, EMI deadlines, and setting of reminders have to be kept in mind. The borrower must check if the lender allows for early repayment and if it does, is a fee charged for the same. One must ensure that this fee is not very high.

3. Organise documents: Necessary required documents have to be kept organised and ready. Different lenders can ask for a different set of documents. Hence, the individual has to make it easy for themself and keep documents such as Aadhar card, PAN card, payslip, etc., ready. The earlier that one is able to submit the document, the faster they will learn about available options.

4. Check the eligibility: Every lender will have their own set of criteria to decide the eligibility. But broadly speaking, parameters such as age, monthly fixed income, credit history, credit score, other financial obligations, etc., will be the deciding factors.

5. Terms and conditions: There are certain terms and conditions attached to every loan, be it personal or any other type. A borrower has to abide by these TnCs till he/she clears the borrowed loan. Violating the terms can make the borrower pay a penalty too. So the TnCs have to be read carefully and the borrower should choose the loan that fits them the best.

A borrower has to safeguard themselves before applying for an instant personal loan on an application. Madhusudan Ekambaram, CEO, KreditBee advises, “Firstly you should look at the legitimacy of the NBFC that is backing the lending platform, since many platforms are lending online today without a proper NBFC backing in the first place. Secondly, one should look at the feedback about the lending platform on digital media, which can give a good understanding of the consumer sentiment about the platform. Thirdly, they should get a clear view of the interest rates and other fees on distribution platform listings during the loan application process, as well as getting explicit information & documentation around the loan, included but not limited to loan sanction letter, agreement, repayment schedule, GST certificate, and all charges that the user has to incur to avail the service. Consumers should additionally have a clear look at the website of the platform, and check on their policies, code of conduct, and customer complaint handling mechanism.”

Another thing that one should be cautious of is data theft. Data theft is the most common form of cybercrime used for financial fraud. One has to become increasingly aware and cautious of not giving out personal details on unverified websites or to anyone on call posing as a bank or financial institution employee. The borrower has to ensure that they are working with a reliable and trustworthy lending institution that follows high-security standards.

When a lender is finalised, it should be ensured that various banks and NBFCs are compared. The interest rates, prepayment charges, loan tenure, any other charges, etc., must be checked before the personal loan application.