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Do’s And Don’ts Of Applying For Loans On Digital Platforms

Like any financial transaction, a digital application for loans must be conducted after due diligence.

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Fintechs have made the sometimes tedious process of applying for loans remarkably easier and quicker. There is no need to carry x number of documents and talk to multiple people at the local bank branch. Instead, one can complete the process in a matter of minutes online. Once the KYC documents are approved, getting the loan also takes just a matter of minutes. These conveniences have become critical in case of emergencies, whether it is for business, educational, or personal purposes. 

However, convenience and efficiency cannot trump over safety. Like any financial transaction, a digital application for loans must be conducted after due diligence. Carelessness can become too expensive, risking one’s financial stability. Here’s a list of easy-to-follow do’s and don’ts to follow when applying for a loan through digital platforms. 

DO’S

  • RBI registered: At the very minimum, check that the app is tied-up with an RBI-registered Non-Banking Financial Company (NBFC) lender. Registration means that the firm follows the regulatory norms, including data privacy and collections norms, laid down by the regulatory body and is not overcharging or flouting the law. This information should be available on the website and app. 
  • Compare and select: With so many fintech firms on the rise, the customer must conduct thorough research on the various options available. Carefully go through the interest rates, comparing them against loan tenures and repayment options. In particular, interest rates and loan tenures are the deciding factors. Fintechs offer a distinct advantage in making quick comparisons. 
  • Check app store ratings & reviews: The app store is perhaps the best place to get customer feedback. One can read reviews from genuine users with a handy rating system, providing a quick insight into different areas like usability, customer service, trustworthiness, and other critical factors. 
  • Add EMI to the emergency fund: An emergency fund is the backbone of every personal finance plan. To ensure that there are no defaults on repayment in case of a crisis, it’s a good idea to add your EMI to the emergency fund. Ideally, it should take care of 3-8 months of expenses, depending on your capability and spending pattern. 
  • Check eligibility criteria: Fintechs are usually seen as a more convenient option for availing loans. But like any other financial agency, they will be stringent about their eligibility criteria. It is always advisable to check these terms before applying for a loan. 
  • Read the fine print: Legally, a fintech firm is required to put all the terms and conditions on its website. Go through the charges, terms, and conditions levied by the company (especially for defaults or late payments) before applying for a loan.
  • Customer service: Check the customer service team’s responsiveness of the firm across social media and online portals. In case of any mishap or complication, they should be able to provide quick resolutions to their customers.
  • Calamity relief: COVID-19 has created awareness of the necessity of safeguard against calamity. Check if the lending platform has any provision to provide some form of monetary relief for repayment in case of any unavoidable nationwide calamity. Some firms provide repayment extensions, such as a moratorium, to customers who cannot repay due to any special and pre-specified conditions. The availability of such relief can also help protect one’s Cibil and Credit scores in case of a default. 

DON’Ts

  • Avoid physical handover or cash payments: The whole aim of digital lending is to avoid the physical handover of documents or money. Never handover your physical documents or repayment money to any agent claiming to be from the said firm. Always upload your documents and repay via the company’s official app or website.
  • Sharing personal information: Never share OTP, bank, or personal details with an agent. Most fintech firms have two-step authentication processes that are clearly defined. 
  • Avoid defaulting on repayment: As with any other loan, not repaying on time will lead to a negative impact on one’s Credit and CIBIL scores, hampering any chances of availing a loan in the future. In case of any issue, it is recommended to contact the company before the due date instead of defaulting on the payment.
  • Ignore repayment terms: Most people tend to ignore the fine print, especially for the repayment terms. You can go through the terms mentioned in the Sanction Letter and Welcome Letter that are issued to you on the NBFC letterhead upon approval and disbursement respectively. In particular, check the dues and charges which will be levied in case of failure to make payments or if making a late payment.

With their ease of transaction, fintechs are the future. Sooner or later, most of us may end up applying for a loan from these online platforms. Hence, it is highly advisable to follow these do’s and don’ts when applying for an online loan. A little diligence, in the beginning, will save one from an expensive mistake in the future.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Kissht loans

Ranvir Singh

The author is Co-Founder & MD, Kissht

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