Instant Loans: How consumers can finance personal needs from new age finance companies

March 17, 2020 6:21 PM

There are significant advantages of availing a loan from the new age Fintech platforms which operate on the premise of data, analytics, robust technology and customer experience.

instant loan, personal loan, fintech companies, millennials, NBFC, Personalized offers, credit historyThere are various advantages which make Fintech platforms the most preferred option to avail instant personal loans.

Instant loans means funds get credited to customer’s account immediately after they apply for a loan. This includes a seamless customer journey and relaxed underwriting in many cases, in addition to superfast turnaround time. Generally, banks take a few days to process an application. However, with emerging use of technology, data and analytics, several new age institutions have come up that have lowered the barriers, thereby enabling customers to access loans instantly. These companies are using digital platforms to originate customers, underwrite and service them. New age platforms which originate and fulfill loans digitally are called Fintech companies.

It took 10 days for Aditya Kumar, 38 a Mumbai-based sales manager, to avail a Rs 5 lakh personal loan from a private bank for his marriage about four years ago. 3 years later while he was still paying the EMI, Aditya wanted to avail another loan to go for a vacation. He applied to a fintech platform where he got the loan instantly. Later Aditya availed a top up to pay off his previous personal loan and consolidated his EMI into one loan.

Aditya is not an exception and there are many young professionals, especially millennials, who are accessing instant loans to meet their consumption finance needs. There is also a shift in the lending pattern with customers preferring short-term personal loans to finance their vacation, wedding, consumer durables and other lifestyle requirements.

Today, availing a loan is faster and easier than ever; however this can push a customer to a debt trap. It is important for customers to ensure timely repayment to build a strong credit history which will help them to procure faster loans in future at better rates.

There are significant advantages of availing a loan from the new age Fintech platforms which operate on the premise of data, analytics, robust technology and customer experience. These companies access the traditional as well as incremental alternate data for digital underwriting and making personalized loan offerings.

There are various advantages which make Fintech platforms the most preferred option to avail instant personal loans. Some advantages are below:

1. Quick & convenient process: The application process is almost entirely digital and loan decisions are communicated to customers instantly. Super easy and convenient interface. This saves a lot of time and effort with the process completed in just a few minutes.

2. Personalized offers: While traditional banks and NBFCs follow the conventional way of underwriting loans, the new age finance companies are more flexible, faster and provide customized offers to customers. Offers begin as low as Rs 500 and can go up to Rs 25 lakh. Loan tenure and ROI are also flexible and personalized. Such customized offerings are the outcome of advanced underwriting algorithms that combine traditional and alternate data.

3. New to credit segment: Customers availing loans for the first time do not have any existing repayment history nor are they part of the credit bureau. These are mostly young professionals, millennials who are looking for a personal loan to manage their financial needs and lifestyle requirements. The use of demographic and alternate data, adoption of analytics toolkit and techniques of artificial intelligence are helping new age companies to underwrite these customers and provide them loans. Customers can than build their repayment history on the credit bureaus.

4. Digital repayment and servicing: These platforms provide customers flexibility and ease of process to repay their loans through various digital instruments like debit mandate, e-NACH or payment gateways. The servicing and customer interactions are also managed digitally through their mobile app/website/chatbot etc. This is a big step towards convenience and cost saving.

Eligibility criteria for instant personal loans from fintech platforms is broadly as follows:

# Age – Most Fintech platforms serve customers in the 21 – 55 years range
Income –There is a basic income criteria for all these companies with most needing minimum monthly income of Rs 15,000.

# Employment – Most Fintech platforms look for employment details and stability around the same. The stability criteria is different for different lenders, however, this information is key to underwriting and approval.

# Document requirement – Customers have to provide their KYC documents which include PAN, Aadhaar card etc. along with their pay slip/ bank statement which is verified online to provide instant credit decision.

Fintech platforms have changed the way lending happens and they have become very popular with customers in a short time span. Fintech platforms’ growing influence in the financial services sector is strengthening operational efficiency and boosting innovation. Fintech platforms are helping in financial inclusion by providing instant and customized loans for various consumption needs such as vacation and wedding expenses to ‘New to Credit’ customers. One can avail these loans from various players.

(By Pratyush Chandramadhur. The writer is Head of Consumer Products, Clix Capital)

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