Personal loan from a fintech platform? THESE are the five factors you should consider

Mint

5 hours ago

If you are planning to raise a personal loan, there are a dozen options. You can fill out a form to get a loan approval from a bank, check if you have a pre-approval or not. Alternatively, you can reach out to a fintech platform for the loan.
It is not an uncommon dilemma to choose between a bank and fintech platform when you are looking for a small loan. But before you make a decision, make sure you exercise due caution. It is recommended to be aware of these points before you opt for a fintech platform for a personal loan.
I. Reputable platform: As much as possible, reach out to a platform which is reputable and not the obscure one with only a few thousand downloads.
II. Applied for a bank: The first choice while applying for a loan should be a bank. And if you can not make it to a bank loan, only then you should explore other digital platforms.
III. Interest – monthly or annual: It is common among fintech platforms to pitch their rate of interest on a monthly basis. To put this in perspective, you should understand that 'only 1.5 percent a month' is 18 percent per annum. So, one should not get too carried away with the low rate of interest offered by the platform.
IV. Reviews online: Another smart tip to follow is to check the online reviews of the loan service provider (LSP). If the platform is profoundly lauded by the users all around, it means it indicates a good experience ahead as you apply for personal loan. In contrast, a platform which gets a lot of flak online should be kept at an arm's length.
V. RBI approved: RBI typically regulates regulated entities which include banks and NBFCs. But the loan service providers (LSPs) are supposed to be operating in accordance with the Digital Lending Guidelines issued by the Reserve Bank of India (RBI).
And as per these regulations, these platforms must display loan offers including clear details such as loan amount, annual percentage rate (APR), loan tenor, monthly repayment obligations and penalties. Typically they are not even supposed to rank the offers, unless it is based on a publicly disclosed unbiased metric.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
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