Zee Exclusive: 5 reasons why you should opt for a `Digital Loan`

New Delhi: Digital lending is speeding up the loan process and making credit more accessible to the underserved population from lower income background

Apart from the obvious benefits of affordable credit for MSMEs and new-to-credit or low income groups, here are five other reasons why digital loans trump conventional loans.

1. Easier Application Processes

One of the biggest hindrances to accessing credit is the long and arduous loan application process. From submission of documents to the time taken for the final yes, a loan can take months to process. With digitisation, borrowers have the option to initiate a loan application remotely at any given time. Data entry processes on digital platforms are also much faster and there is a minimal risk of human error. Even documents don’t need to be processed physically; instead, scans can be uploaded and the entire process is more streamlined and less cumbersome for borrowers and lenders.

2. Lenient Borrower Eligibility Norms

Conventional lending processes require borrowers to submit employment history, housing proof, salary slips and documents of assets etc. for a credit score to be formulated. While some of these basic eligibility documents are essential, the rest tend to be a barrier for young professionals and those who are new to credit. Digital lending opens up the possibility for highly underserved segments in society such as low-income communities and part time workers to have access credit. Digital lenders often look at other parameters—social media history, online spends, travel history—in order to determine credit worthiness. This ensures that the credit door is not just open for those who are financially stable, but is helping those who are trying to build a base for themselves.

3. Flexible Payment Options

Digital lending enables borrowers such as salaried individuals to gain access to a flexible credit line of up to Rs. 5 Lakh. Such loans are usually considered high risk by big banks, but digital lenders consider it to be small-ticket loans. The EMIs for such loans are also stretchable and range from a few months to up to 2.5 years. Such loans open up access to credit for small business owners and individuals who might be in need of help with their personal finances.

4. Beneficial to Lenders

Digital loans are not just beneficial to borrowers; they offer significant advantages to the lending community as well. For starters, with the loan underwriting procedures being digitised, a lot of manpower can be repurposed towards personal relationship building activities with clients. This ensures that lenders can keep customer service at the heart of their business and the digital aspect doesn’t make their business faceless.

5. Quick Decision Making

When it comes to lending, the final goal is to help the beneficiary of a loan in the best way possible. Time-consuming verification processes are sped up with the help of cloud technologies, imaging, and analytics. Right from application to document management to electronic signatures and credit analysis, with digital technology being part of every step of the way, loans are disbursed way faster.

With over 500 million internet users, India’s financial sector is at the precipice of a digital revolution. This is especially true for the lending sector where traditional processes of loan disbursement are being swapped for faster digital routes. The preference towards digitisation and automation in India also stems from the government’s push towards inclusive financial growth and schemes such as the PMJDY that has increased the percentage of adults in India having bank accounts to 80%. All of these trends are leading to a paradigm shift in the lending sector that is pivoting towards greater financial inclusion for previously underserved customer segments.

(Expert comment by Ranvir Singh, Founder & Managing Director, Kissht)

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