Bank results posting year-on-year growth highlight the growth in their profits owing to an increasing number of loan disbursements. Despite the recent hikes in interest rates, banks are riding on loan growth from both the retail and corporate segments. Many banks have posted higher net profit results, thus, indicating how increased credit rates have not dampened the investors’ and borrowers’ spirit.
With technology making it easier for us to order everything online, applying for loans through the web is now easy. Most importantly, it is convenient as you are saved from the hassle of hopping between banks with your application forms and seeking information on the interest rates they charge from their customers.
Digital loans aka personal loans
While digital loans are indeed the order of the day, it makes sense to exercise prudence before applying for one. This is especially true for personal loans that charge higher interest rates than others. Also, there can be many reasons for seeking a personal loan. While some avail of this kind for personal reasons, others use the money to further their commercial prospects. Most digital loans are like personal loans since many lenders do not classify the loan amount sought by borrowers under any specific category, unlike traditional loans. Also, these loans are mostly disbursed by fintech companies as opposed to banks that offer both online and offline services to their customers.
While many inclined borrowers may jump at the prospect of applying for digital loans, know that these loans also come at interest rates that are usually more than the money lent by banks. So, read the terms and conditions carefully before applying.
Maintain your credit score
Many borrowers avail of these loans as a way of debt consolidation that they can repay over the period. This also means that they had sought loans from various sources that they found difficult to repay, thus, prompting them to look for a way that allowed them to repay their debt at only one source. With the debt limit already high, it makes sense to ensure that the personal loan amount must not be too high. This is because the higher the loan amount, the more will be the loan instalment that would have to be paid. Also, the loan amount would be spread out into more equated monthly instalments (EMIs), thus, forcing a higher interest outgo. Considering this factor is also important as the EMIs that must be repaid should not be more than your income or monthly salary.
Also, applying for a higher loan amount can affect your credit score adversely if the same is not repaid in time or if you default on payments or insist on a prolonged loan tenure owing to your inability to pay within the stipulated period. Ensure that your CIBIL score is not affected and stays in the range of 750-900.
Check lender’s details
You must be aware of whom you are borrowing from, lest your personal and income details that you have shared are used for some untoward purpose. Make lender verification a priority lest you suffer from identity theft. While one may think that identity theft is limited to foreign lands, the fact is that millions of Indians are equally affected by it.
“Identity theft is a criminal offence of obtaining and wrongfully using another person's personal and financial information to get credit, loans or services. Identity theft can be committed in many ways, and it typically leads to victims being left with considerable damage to their finances, credit and reputation. Therefore, it is essential to protect the information in any growing industry that keeps track of people's credit reports, financial activity and PAN details,” says Bhavin Patel, co-founder and CEO of LenDenClub, a P2P loan platform.
Before you seek a loan, keep an eye on the most recent RBI regulations monitoring the working of these lending organizations. Also, you may consider seeking professional help to glean more information about the lender before applying for any loan.