The do’s and don’ts before taking out a loan on digital platforms

While a personal loan helps you brave various emergencies in times of financial crisis, futuristic fintech solutions on digital platforms make lending money and getting a loan a seamless process.

The current COVID-19 pandemic has brought the economy to its knees. The pandemic, which started as a health hazard, slowly turned into a real economic collapse, due to numerous layoffs and business losses. With the rising unemployment rate and the reduction in wages proving to be the new norm, 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 get emergency loans from conventional sources such as banks and NBFCs (non-bank financial companies). In the wake of social distancing norms 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 do’s and don’ts before considering online loans.

What to do when applying for loans on digital platforms

Check the credibility of the lender – Taking out a loan is an important financial decision because you plan repayment terms 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 lending history.

Read and understand the fine print – To make an informed decision, always read the fine print of the Terms and Conditions and Privacy Policy. Understand that these details that people often tend to overlook cover all the important loan details, including the repayment schedule and fees. Remember that these small details can lead to an increase in the cost of borrowing if you pay EMIs late.

Research, evaluate, then make a smart choice – Before choosing a loan option, be sure to compare interest rates, loan terms, loan terms, 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 credit scoring, it is still an integral part of the assessment process. A borrower’s creditworthiness plays a vital role in the loan process. People with a good credit history or a CIBIL (Credit Information Bureau (India) Limited) score have a higher chance of getting their loan application approved.

What not to do when applying for loans on digital platforms

Say “No” to unofficial sources – The increase in cyber traction has also accelerated the number of online scammers and cheaters. Stay alert to unverified loan applications asking for confidential information such as an address, PIN, bank details and account number. Beware of these tactics and always check your loan source before deciding on a loan.

Refrain from taking out several loans at once – Taking out multiple loans at once increases the likelihood of default on loans, which can affect credit rating and reduce eligibility for future loans. Instead, combine all your financial needs into one loan and manage your finances more.

Avoid physical contact; maybe it’s an impostor – The goal of the online lending structure is to make the lending process contactless, safe, convenient and hassle-free. So if a company or agent asks you to physically hand over documents, it just goes against the very structure of the online lending system. Therefore, it is advisable to upload all documents to the verified lending company account and do not entertain any agent asking for physical contact.

Look beyond interest rates – Checking interest rates is an important part of the research plan. However, that’s not all. Look at things like prepayment fees, processing fees, and pre-closing fees, as they can make a marginal difference later. Remember that a personal loan is a short-term loan. In most cases, it is repaid in a maximum of five years. Over time, your income may gradually increase. Thus, your prepayment charges should not be too high in case you decide to prepay or pre-close the entire loan amount.


While a personal loan helps you brave various emergencies in times of financial crisis, futuristic fintech solutions on digital platforms make lending money and getting a loan a seamless process. However, in this fast-paced and ever-changing world powered by technology, it can be crucial to heed the tips mentioned above to get the best and safest deal possible for your loan.

by Anil Pinapala, Founder and CEO of Vivifi India Finance

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