Way back in 1994, Microsoft co-founder Bill Gates once said ‘banking is necessary, banks are not’. In 2021, this is still not completely true, but with the advent of fintech applications, its inherent message is inching closer to reality.
For a long time, the only way to seek a personal loan was to knock on the doors of a bank or a financial institution, submit documents and wait for their approval. Although most banks have now gone digital, there are some fintech companies also in the fray that double as online lenders and are authorised to give personal loans, accessible literally at a click — or a touch.
From applying for the loan, usually up to ₹5 lakh, to submitting the documents and repayment in the form of EMIs – the complete process is online.
But do not fret — the money is real!
Nevertheless, it is not all hunky-dory. The rate of interest is comparatively more than that of commercial banks. A salaried person with a good credit score can avail a personal loan at the rate of 10.5-12 percent per annum from a good bank. But fintech apps disburse loans at a far higher rate – sometimes as high as 25-26 percent per annum.
There are scores of apps that offer personal loans. To a lay borrower, they appear as peas in a pod, we list only the commonly known ones.
These are the five apps that offer personal loans via smartphone applications:
Money Tap: One can borrow up to ₹5 lakh and repay in 3 years. The rate of interest starts from 13 percent per annum. The process of seeking a loan is almost the same in all the apps. One can download the app, fill in basic information, complete the KYC process, following which your credit line would be open. You can borrow the money as much as you need within the threshold of the credit line approved. You can repay the loan in easy EMIs.
PaySense: It merged with LazyPay recently, and offers personal loans up to ₹5 lakh. They also offer a line of credit and one can borrow upto 50 percent of this credit line.
CASHe: It offers loan upto ₹4 lakh with a maximum repayment tenure of 1.5 years. The interest is charged at the rate of 2.5 percent per month and the processing fees can be as high as 3 percent of the loan amount.
EarlySalary: This app allows users to borrow up to ₹5 lakh for up to 24 months. One needs to download the app, click on the SalaryCard tab, answer a few queries, complete KYP with OTP consent. At the end, one needs to set up a passcode to get the card activated.
LenDen Club: It enables peer-to-peer lending and interest rate starts from 11.50 percent per annum. One can decide the loan amount and repayment schedule.
It is important to know that some of these personal loan apps are not run by professional organisations, and their intent might be malicious — to harass the customers. So, one must be careful of the implications of borrowing money from an obscure or fraud app that may be projecting itself as a fintech company.
In 2020, several gang members in Bengaluru were arrested for harassing borrowers after giving them instant loans via apps. Those apps were reportedly handled by Chinese citizens with China-based servers.
They used to deduct nearly one-third of the loan amount upfront, and would charge exorbitant interest from borrowers. They would hack into the customers' phones to harass them.
As we summarise, we can highlight that some of these money lending apps give personal loans upto ₹5 lakh, and their loan approval process is hassle free.
But before taking a plunge, one must ensure that there are no hidden charges, processing cost is low and the rate of interest is affordable.