Financial technology or Fintech has completely changed the face of traditional financial services industry. Customers don’t need to visit financial institutions physically anymore.

They don’t have to stand in long queues to reach the counter. They don’t have to fill in lengthy application forms. And they don’t have to wait so much longer to get loans approved and credited into their accounts. We are living in a digital-first world, where all these functions can be performed online without any physical interactions.

With the advent of fintech companies, consumers can perform banking and investment transactions from the comfort of their homes. All they need is a smartphone and an app backed by a stable internet connection. Owing to the speed, convenience, and flexibility of these solutions, digital lending has gained so much traction among the common masses, even in tier 2 and 3 regions of the country. The total number of loans sanctioned by NBFCs through digital lending platforms has spiked by more than 55% between 2018 and 2020, indicating the rise of digital lending across India. And this is just a start!

Benefits of fintech lending

The growing adoption of fintech lending is attributed to several factors. For instance, fintech companies follow digital onboarding using new-age techniques like e-KYC and eSign, thus minimizing or completely eliminating the need for physical paperwork. Consumers can opt for loans through online submission of documents like PAN card, Aadhaar card, income statement, etc. on app or website.

For analysing the creditworthiness of consumers, fintech players leverage efficient underwriting algorithms, which enable them to sanction loans only to the genuine borrowers with positive intent and good repayment history, almost immediately.

Traditionally, it takes around 7-8 business days for lenders to disburse the loan. But with fintech, a borrower can get money credited into his account in a few hours.

Clearly, fintech lending is fast, convenient and seamless compared to conventional lending methods that are highly tedious and time-consuming. However, as a borrower, you must keep a few things in mind while taking loans from fintech companies.

To begin with, a borrower must check and learn the lender’s credibility before availing of a loan. For this, they should scan through their testimonies, read about both negative and positive reviews, and find out whether or not the lender is honest with customers throughout the transaction. One of the best ways to collect honest feedback about the lender is to communicate with previous loan consumers and know all the pros and cons. Access to these inputs will help borrowers make informed decisions and protect them from any kind of hidden costs.

Once the fintech company is finalized, don’t forget to read the fine print during the loan procedure. You must read and review all the terms and conditions of repayments, including processing fees, prepayment fees, defaults and late payments. This simple practice will help you save unnecessary costs. In fact, borrowers must know that any fintech lender is legally required to keep all the terms and conditions transparent with customers.

Another aspect where borrowers must pay attention to is EMI. They should calculate EMIs carefully and ensure that these payments don’t act as additional burdens and suck out all the savings. Therefore, use EMI calculator to find out the exact amount that needs to be repaid every month and for what period, without affecting your overall financial condition. It is always advisable to keep EMIs below 10% of the monthly salary.

And in case it is higher, you must mindfully plan out other expenses and strive to reduce them as much as you can.

Borrowers must also pay heed to a couple of more aspects, mainly regarding safety and security.

For instance, fraud lenders always target high-risk debtors who are always on the lookout for quick loans. These lenders usually force consumers to opt for a loan. Once they go for it, they constantly keep harassing them to repay money by even calling and giving reminders to other members of the family. Also, such lenders don’t share physical address so that nobody can trace them. Borrowers should also examine the app or website meticulously before availing of a loan.

In a nutshell

Digital lending has been growing immensely in India due to ground-breaking innovations brought in by fintech players. In fact, today, our country is one of the fastest-growing fintech markets in the world, with digital lending likely to touch the $350 billion mark by 2023. However, despite all these extraordinary growth and developments in this segment, borrowers must keep the aforementioned points in mind before reaching out to fintech companies. Doing so will not only ensure safety against fraudulent activities but also make repayments smooth and seamless throughout the financial journey.


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