By S V Prasanth Naidu, CMO, Moneyview
The emergence of Fintech has significantly boosted financial inclusion in the country. Powered by advanced technology and a seamless digital experience, financial services can be easily accessible anywhere, anytime just by using a smartphone.
One of the products to gain popularity among people is fully digital personal loans.
More than 70 per cent of formal credit provided by banks in India is given to less than 10 per cent of the most affluent Indians. The average middle-class, particularly earning less than Rs 5 lakh annually, are the most underserved.
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They either don’t qualify for loans from banks due to stringent credit score and income requirements, or the excruciating process involves a long list of documents and paperwork, making timely credit access a distant dream. For emergency situations, this is highly discouraging.
This is where Fintech companies steps in and enable people to avail of loans with a completely digital process, offering disbursals almost instantly! Users can get a loan by just downloading the loan app on their smartphones instead of running from pillar to post or reaching out to bank agents. With technology, various processes like Credit- assessment, Document verification, Repayment (Auto-debit setup), have made online loans easier & faster. Fintechs have also opened the door for other financial services ranging from banks, investment, insurance and pay later solutions.
Let’s take a closer look at how digital loans save time and effort:
Flexibility of loan amount
The requirement for a personal loan varies among people applying for online loans. Thus, digital platforms enable people to borrow amounts as small as Rs 5,000, which can go up to Rs 5 lakh basis their need & eligibility.
Quicker eligibility checks
Checking eligibility for a loan is extremely easy on digital platforms. Machine learning & risk-assessment models make it possible to figure out whether you are eligible for a loan or not in just two minutes by using just an app.
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Ease of documentation & Verification- Today, documents can be verified online in seconds through various available modes like, cKYC, Digilocker. The emergence of API-based solutions helps with real-time photo/income verification, which reduces approval time drastically.
Unlike the traditional method of getting a loan, which took weeks of paperwork and several rounds of the bank, online loans are approved, and disbursed almost instantly, within minutes if your documents are in proper order.
While traditional banks have a ceiling for tenure & ticket-size, fintech firms offer more flexibility in terms of choosing the right repayment plans ranging from a few months to 60 months. This helps ensure the loan affordability for users without any additional financial burden.
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Often people with no or low credit history are deprived of loans/other credit products. However, the fintechs do not discriminate against them. A user can get a credit product (of a small size: 5K-10K). As the user maintains a good repayment behavior, not only their credit score improves but they can also get approved for better offers or newer products in the future.