Dos and don’ts before borrowing from digital platforms
The current COVID-19 pandemic has brought the economy to its knees. The pandemic which began as a health hazard slowly turned into a real economic collapse, due to numerous layoffs and business losses. With the rising unemployment rate and falling wages turning out to be the new normal, more and more people have started to face a financial crisis. At such a crossroads, emergency funds have become an imperative financial solution.
However, COVID restrictions have become a barrier for people to obtain emergency loans from conventional sources such as banks and NBFCs (non-bank financial companies). In the wake of social distancing standards and fear of contracting the virus, people are reluctant to visit these institutions in person, making digital platforms a hotspot for money-lending practices. That said, the growing risk of cyber fraud in the burgeoning online lending structure makes it essential for anyone to assess the dos and don’ts before considering online loans.
What to do to apply for loans on digital platforms
Check the credibility of the lender – Taking out a loan is an important financial decision because you plan repayment methods before you even borrow money. Therefore, before applying for or taking out a loan from any source, it is crucial to first validate the credibility of the lender. Always make sure that the lender is verified by the Reserve Bank of India (RBI) and has a reliable loan history.
Research, rate, then make a smart choice – Before choosing a loan option, be sure to compare interest rates, loan terms, loan term, and repayment options. Select the loan option that best suits your needs and financial situation.
Maintain a good credit score – Although many new era fintech institutions may look beyond the credit score, it is still an integral part of the assessment process. A borrower’s creditworthiness plays a vital role in the lending process. People with a good credit history or a CIBIL (Credit Information Bureau (India) Limited) score are more likely to get their loan application approved.
Do not apply for a loan on digital platforms
Say “No” to unofficial sources – The increase in cyber-traction has also accelerated the number of fraudsters and cheaters online. Stay alert for unverified loan applications requesting confidential information such as address, PIN, bank details, and account number. Beware of such tactics and always check your loan source before opting for a loan.
Refrain from taking out several loans at the same time – Taking more than one loan at the same time increases the likelihood of default, which can affect credit scores and reduce eligibility for future loans. Instead, combine all of your financial needs into one loan and take more control of your finances.
Avoid physical contact; maybe he’s an impostor – The agenda of the online loan structure is to make the loan process contactless, safe, convenient and hassle-free. So, if a company or agent asks you to physically hand over documents, it simply goes against the very structure of the online loan system. Therefore, it is advisable to upload all documents to the verified account of the loan company and not to entertain any agent requesting physical contact.
Look beyond interest rates – Checking interest rates is an important part of the research plan. However, this is not all. Look at things like prepayment fees, processing fees, and pre-closing fees, as they can make a marginal difference down the road. Remember that a personal loan is a short term loan. In most cases, it is repaid within a maximum period of five years. Over time, your income may gradually increase. So, your prepayment charge shouldn’t be too high in case you decide to prepay or pre-close the full loan amount.
While a personal loan helps you deal with various emergencies in times of financial crisis, futuristic fintech solutions on digital platforms make lending money and receiving a loan a seamless process. However, in this fast-paced and ever-changing world fueled by technology, it can be crucial to heed the tips mentioned above to get the best and safest possible for your loan.
by Anil Pinapala, Founder and CEO of Vivifi India Finance