What is digital lending?

In simple terms, it indicates the lending process through digital platforms. Generally, mobile apps and websites are popular media for the digital lending process, and there is no requirement for a physical bank visit.

Why are young Indians using digital loans?

It is easy to get a loan from digital applications. Additionally, speed, convenience and accessibility are differentiating digital loan systems from traditional banking systems. There is no need for bank verification or other hassle that makes the service stand out.

How instant loans work

There are 7 steps in how instant loans work, which include application, KYC, Credit assessment, loan offer, acceptance, disbursement, and repayment.

Processing fees vs interest

Interest is the cost of borrowing money that borrowers pay to lenders, whereas processing fees reflect the cost of processing the loan, including the tax amount. 

For instance, you take a ₹ 100,000 loan, and banks charge an additional amount for physical verification, online processing, and making agreements. 

What happens when you miss an EMI?

A late payment charge is added if an individual misses an EMI in digital lending. Additionally, other charges and recovery fees increase the cost of borrowing. On the other hand, a decline in the credit rating score affects the ability to get a loan in the future.

How to identify a fake loan app

• In case there is no specific information about the lender.
• Omission of company name or regulatory information.
• No clear loan agreement
• Unclear interest and fees

What borrowers should check before accepting a loan

Borrowers need to cross-check and verify if the entity is authorised or not. They should check if the digital lending platform is listed in NBFC or Banking lists. All information regarding the loan amount, interest rate, processing charge and other hidden costs. Finally, we need to contact the customer support and grievance-redressal team before taking loans and checking authenticity.