However, how reliable are these digital lending platforms for business loans? Can one rely on these to make ends meet?
Let’s start off by looking at the key highlights of the initiative:
1) Financial Inclusion
This is the age of smartphones, and the internet rules it all. The high tide of this digital revolution has made products and services more accessible to a larger audience. The financial gap barring MSMEs from accessing credit has widened and the realisation of this has fueled entrepreneurs to build apps that are user friendly to disburse credit through tie-ups with NBFCs and Banks.
2) Safer Means of Wealth
The instant need for credit for MSMEs has been a ground reality. This has led to a certain feudal system of sorts to form, where if no alternative is found, MSMEs tend to borrow from moneylenders where the interest rate is exponentially high, compared to the principal amount lent to the borrower. Imagine, years of high payments and burden! Hence, digital platforms lending money are favored over others.
3) Owning the Clock Work
The prime factor for choosing instant loan disbursing NBFCs is the fact that the digitization of the lending process assures a lot of time being saved. It cuts down any/all leaks that are bound to occur in an offline implementation by streamlining the business loan process and increasing its transparency.
4) A Variety Wide Showcase
The digital lending sector has been an ever-growing solutions sector and it’s a fair dilemma for anyone to choose the right digital lender. However, as most of these loans are individual based (such as personal loans, two-wheeler loans, car loans, etc.). Under the umbrella of personal loans, one can gain quick access to funds for time-bound purposes and a much easier process, towards receiving a tailor-made credit disbursal.
Below are some ways to understand how you can select a suitable credit provider for your loan needs:
a) Understand your need and choose the suitable category
The industry is ever-growing, and new financial products are entering the market even as you read this. Hence, it’s important that before you apply for credit, you understand the reason for which you need it in the first place. As you look for NBFC lenders, try and make sure that the loan you want to apply for, will help you meet your purpose. While some digital lenders require collateral before disbursal of credit, most of them don’t so keep that in mind as you make your decision.
b) Compare processing fees and interest charges
This is a very important aspect to consider when applying for a loan from an NBFC. While the digital lending process has enabled transparency at its best, make sure that you take the most benefit from this by comparing the processing fees and interest charges among the players in the industry. NBFCs sometimes have very minute changes in the interest rates that they charge, however, it plays a trivial role in the part of the payments, especially based on the tenure of your loan.
c) Always read the terms and conditions
While most people tend to ignore the “Terms and Conditions” section, it’s very vital when it has to do with credit. Read through the fine print before agreeing to it so you can understand all the possible obligations that you would be expected to meet once you receive the funds, up till the credit is paid off. This keeps you on your toes and helps you steer clear from any hurdles through your journey with the NBFC. If you have any queries or doubts, get them cleared immediately by getting in touch with the concerned team.
d) Be aware of the hidden charges
Any type of loan, especially if it’s a personal loan, has various fees, ranging from processing fees, and its penalty fees. Make sure you understand each of them and make sure that you know where your money goes, apart from the EMI.
e) Understand the prepayment penalty rules if any
Of course, it’s best to close a loan as soon as possible. However, many lenders could take unfair advantage of you if you close a loan through prepayment. Make sure you understand the guidelines regarding the prepayment penalty, if any, from your chosen NBFC and the respective loan that you wish to apply for.
Most times, applying for a digital loan may come at a higher interest rate than its offline counterpart. However, the benefits are much higher. Make sure you make the right decision while choosing your credit financing partner.