Take a personal loan from fintech companies? Keep these things in mind

While personal loans offered by banks and other traditional setups take around 7-8 business days to disburse, some fintech players provide approval within 5-10 minutes and disbursement of the loan amount within up to 72 time.

India is among the fastest growing fintech markets in the world, with an adoption rate of 87% against a global average of 64%, as the Minister of Finance recently stated.

Madhusudan Ekambaram, co-founder and CEO of KreditBee and co-founder of FACE (Fintech Association for Consumer Empowerment), says: “The impact is visible in the personal loan segment, as the process of obtaining loans has become very convenient and faster. Traditionally, banks relied on physical due diligence evidence that included past bank account performance, credit rating, proof of salary, age and loan term, to disburse the loan. This made the whole process cumbersome and time-consuming, which involved a high degree of physical documentation. »

However, now that fintech players are taking advantage of digital loans, the need for physical documents has either been eliminated or limited to a large extent.

Why are fintechs gaining so much popularity?

“Borrowers’ growing affinity for fintech for personal loans can be attributed to their distinctive characteristics, enabled by technology,” says Ekambaram.

These digital lenders have the ability to extend funding to New to Credit (NTC) borrowers, unlike traditional risk-averse setups like banks and NBFCs.

They offer highly personalized products tailored to the varied requirements of borrowers, with minimal documentation.

Their digitized operations make the whole process quick and very convenient.

Most banks and financial institutions charge partial or prepayment. However, with fintech companies, borrowers can choose ones that have no fees on part or prepayment.

Required documents

A personal loan is an unsecured loan that requires minimal documentation. The digital lender assesses the creditworthiness of the borrower based on the following parameters:

  • credit history
  • income level
  • Employment history
  • Repayment capacity

A loan from fintech players can be obtained by simply submitting documents such as PAN card, Aadhaar card, salary slips for a certain period and bank statement for salary account. Fintech players offer to put these documents online, either via a mobile application or via a website.

Credit rating

To analyze borrower creditworthiness, lenders use KYC details (PAN and Aadhaar) to pull credit reports from the bureau. Ekambaram adds, “They further use their efficient underwriting algorithms to assess credit rating and repayment history, to provide loan approvals almost immediately.”

He further adds, “They leverage e-KYC for borrowers to digitally sign loan agreements through their Aadhaar details and Aadhaar-linked mobile number.”

While personal loans offered by banks and other traditional setups take around 7-8 business days to disburse, some fintech players provide approval within 5-10 minutes and disbursement of the loan amount within up to 72 time.

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