Digital loans are becoming increasingly popular in India, offering a convenient way to access credit for various needs, such as personal expenses or business working capital. This article explains what digital loans are and provides a clear step-by-step guide to the application process.
What are Digital Loans?
Digital loans allow you to apply for and receive loan approval and disbursal completely online via websites or mobile apps. This is enabled through integrations with credit bureaus, e-KYC, digital signatures and instant online bank account verification. It avoids the need to submit physical documents or visit bank branches. The digital loan application process is entirely paperless and does not require any in-person visits.
Steps to Apply for a Digital Loan
Below are some of the common steps that will help you to apply for a digital loan online with ease:
1. Shortlist Loan Providers
Evaluate and compare the offerings of various digital loan providers as per your borrowing needs in areas like maximum loan amount, interest rates, eligibility criteria, prepayment policies, etc. Shortlist 2-3 loan providers providing loans as per your requirements.
2. Analyse Interest Rates
Interest rates vary widely across lenders, so compare rates and processing fees for shortlisted lenders and analyse projected repayment totals for your chosen loan amount and tenure to finalise the most cost-effective option.
3. Check Eligibility
Every lender specifies basic eligibility criteria regarding applicant age, income, credit score, etc. Verify you meet the eligibility guidelines for your selected lender to avoid rejection. First-time borrowers have better approval odds with new-age digital lenders.
4. Prepare Required Documents for Digital Loan
Though documentation needs are lower, having ready documents like ID/address proof, latest bank statements reflecting salary credits, and any other income proofs will help in swift processing. Ensure documents are clear and valid.
5. Fill Application Form
Digital lenders provide dedicated online/mobile application forms. Applicants may provide Know your Customer (KYC) details, employment, income, and existing liability information. Furnish accurate information. Read the terms and conditions before accepting digitally.
6. Account Verification
Authorise lenders to quickly electronically verify provided details, including banking data, credit score, etc. Stay available over phone/email during verification in case any additional inputs are needed.
7. Receive Loan Decision
Lenders generally communicate loan approval or rejection decisions typically within a few minutes up to 1-2 days maximum. Minimum eligibility criteria fulfilment by applicants ensures quick approval.
8. Complete E-Agreement
If approved, you will need to sign the loan agreement committing to specified repayment terms digitally. The loan amount will then be instantly credited to the linked bank account within hours.
Benefits of Digital Loans
Here are some of the advantages of digital loans:
1. Convenience
The most significant advantage of digital loans is that the entire process from application to disbursal happens digitally, without requiring applicants to visit bank branches or offices. Everything can be done quickly from the comfort of one’s home or office using laptops or mobile phones.
2. Faster Approval
Digital lenders rely on easy online applications, electronic data checks and automated approval processes instead of lengthy paperwork. This results in extremely quick loan approvals, often within minutes or a few hours of application submission.
3. Flexible Eligibility
Digital lenders look at alternative data like bank account transactions, bill payment history, etc., to determine creditworthiness. This allows even new-to-credit customers to qualify for loans by showcasing repayment capacity from their digital financial footprint.
4. Higher Transparency
From interest rates, charges, tenures, and terms and conditions, digital lenders provide complete upfront clarity on each aspect of the loan. Applicants can make informed decisions based on this data.
5. No End-use Restrictions
Funds from digital loans can be freely used for any legal purpose without requiring customers to specify reasons for borrowing or submit end-use proof documents. This provides more flexibility.
6. Lower Requirements
Basic KYC proofs and latest bank statements often suffice for digital loan applications. Time-consuming income and asset proofs are waived off in many cases, especially for smaller ticket size loans.
Conclusion
Digital lending delivers immense convenience, but it is advisable to evaluate alternatives on parameters like tenure, rates, and charges. Responsible borrowing aligned with repayment capability can help consumers avoid downstream difficulties. For lenders focused on maximising reach sustainably, designing appropriate customer safeguards will be vital. You may also explore digital personal loan options from providers like Shriram Finance, which offer a fully online application process and quick disbursal to meet a range of financial needs. Overall, easy access to organised credit promises to support financial inclusion in India.
