A personal loan is meant to be a great financial tool for borrowers while dealing with a financial crisis
The Covid-19 pandemic has fast-tracked the digitization of lending services and shifted the entire borrower journey online. The level of convenience and seamlessness offered by digital lending platforms is far greater than before, and yet is privy to its share of inconveniences like the recent rise in fraudulent lending apps.
Hence the borrowers must exercise caution and vigilance while opting for a loan via a digital lending app or before sharing their personal information online.
Listed below are some important dos and don’ts that one must consider before applying for a loan on a digital lending platform
Do’s
Check the credibility of the lender: Before applying for a personal loan online with a particular lender, make sure the lender is genuine and authorized by the RBI. It is a must to check the website and mobile app of the lender. The look and feel of the website/app/social media accounts will help in knowing the credibility and authenticity of the lender. Along with that, to protect oneself from falling prey to unauthenticated lending apps, borrowers can go the extra mile and check app reviews on the play store or app store.
Research, compare and then make the choice: Before applying for a loan online, the borrower must compare and do thorough research to understand the various offerings and additional benefits available from different lenders. The borrower must make sure to compare the interest rates, the loan tenure, and the repayment options before finalizing on any lender.
Check the Fine Print Before Applying for Any Loan
Legally, all fintech firms must list down the terms and conditions on their website, and hence a genuine lender will always have the terms and conditions, privacy policy, etc., mentioned on their website/app. It is the accountability of the borrower to read all the fine print carefully to make an informed decision before applying for any loan online.
Ensure You Have a Good Credit Score
While evaluating loan applications, lenders usually assess the borrower’s creditworthiness by checking their credit report and credit history. Borrowers who have a credit score of 750 or above usually have higher chances of getting their loan approved. Thus, to be eligible to apply for a loan online, borrowers must first check their credit score and take corrective measures in case their score doesn’t fall in the desired criteria.
Don’ts
•Don’t share personal confidential information
Avoid sharing information like contact details, address, PIN, account number, or bank details with any lending app agent. A two-step authentication process is the defined procedure in most fintech firms. The borrowers do not have to share any information beyond it. Credentials and personal information are required by fraudulent firms only. So, the borrowers have to be vigilant before sharing any personal information online
•Avoid defaulting on repayment
While evaluating loan applications, lenders assess the borrower’s credit report. Defaulting on repayments will hurt the borrower’s credit score and reduces the chances of availing of a loan in the future. Always contact the lender before the due date instead of defaulting on your payments. Request the lender to extend the due date.
•Don’t make payments in cash or hand over documents physically
The digital banking process makes banking safer and hassle-free for borrowers and lenders. The aim is to avoid getting in contact with fraudulent agents who were asking for either the physical handover of documents or cash payments. Hence it is advisable to maximize the use of the online facility and avoid making advance payment to such agents and upload all documents on the company’s app or website.
•Avoid taking multiple loans in a short period
At times when there is an urgent need for cash. The loan applicant approaches multiple lenders at the same time. Every time the applicant applies for credit, the lender pulls up their credit report from the credit bureau which will be counted as a hard inquiry. Increased hard inquiries will lower down the borrower’s credit score. It will further reduce the eligibility to apply for loans in the future.
A personal loan is meant to be a great financial tool for borrowers while dealing with a financial crisis. The level of convenience and seamlessness offered by digital lending platforms is far greater than before. Adhere to these dos and don'ts to safeguard your interests and to get the best possible deal on your personal loan.
The author is Founder and CEO of IndiaLends
DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.