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The Key Aspects You Should Look For In A Lending Platform Before Taking A Loan

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Whenever you need funds, whether it's for an urgent situation or to buy something you've had your eye on for a while, there are several options for getting a loan, one of which is lending platforms. They have emerged as effective, innovative finance alternatives for those seeking quick access to loans.

In digital lending platforms, people can borrow loans instantly. Aside from being a loan alternative, these platforms are well-known for their ease of use and convenience, where they outperform debt-oriented loan schemes.

What Is a Lending Platform?

The practice of lending money digitally through an online platform such as instant loan apps is called digital lending, and the platform used for this purpose is called a lending platform. The overall process, from loan application to its disbursement, occurs on digital platforms.

The process of availing of quick loans is streamlined on these platforms. Through instant loan apps, the loan application process is streamlined. Someone applying for a loan on these platforms might be asked to fill in a form and procure specific documents, and after finalisation and authentication, the loan may be confirmed in a matter of minutes.

There are numerous benefits to lending platforms, including time savings, lower overhead expenses, less documentation, simplicity, and financial inclusion. That being said, there are numerous flaws and issues with these platforms that have been utilised to their advantage by malicious elements.

Why Scrutinise Lending Platforms

Online lending platforms, such as instant loan apps, may have concealed fees and obscenely high interest rates. When trying to install instant loan apps, the customer has to give permission to the mobile app to obtain their personal information, thus putting it at risk. The likelihood of fraudulent activity by capitalising on data misuse is.

As online lending platforms gain traction and grow in popularity, the number of illegitimate mobile funding platforms and instant loan apps keeps growing by the day. This increases the potential for mishandling and embezzlement.

Taking note of widespread accounts of SMBs becoming victims of unlicensed lending platforms, the RBI has cautioned the general public to check the credentials of any business or organisation providing loans digitally or via instant loan app. Here's a rundown of five things you should know before asking for a loan on digital lending

platforms.

1. Check Upper Loan Limit

Prior to actually applying for a loan, the creditor must be eligible for one. Hence, check your eligibility for loans, and if a lending platform comes along with interest rates or offers too good to be true, they probably are.

If you want a bigger loan, find out what the financial institution's upper limit is since the RBI has set a limit of Rs. 10 lakhs for a loan. If a lending platform offers a loan higher than this limit, turn around and don't look back.

2. Verify Lending Platform’s Credentials

The RBI necessitates NBFC lending platforms to obey its regulations. For example, in terms of safety, confidentiality, disclosure requirements, collection, and so on. Hence, determine whether or not the digital lending platform is registered with the RBI as an NBFC-P2P or not.

3. Substantiate Loan Sanction Time

If you are in an emergency and really need funds quickly, ask the lending platform to see how long it takes them to disburse the funds and verify it against the standard disbursement time.

Any discrepancies will be revealed if the time taken to sanction the loan is uncharacteristic. Lending platforms typically assert a turnaround time (TAT) of 48-72 hours, which may differ significantly depending upon the platforms' total amount of lenders.

4. Check For Hidden Fees

Enquire with the lender about any additional fees associated with the loan in the form of registration charges, charge processing fees, registration fees, etc., in addition to the EMI amount that the borrower must pay.

According to professionals, creditors should account for all fees that they will have to pay, beginning with registration fees and ending with the final disbursement, before calculating the effective rate.

5. Factor in Late Penalties

Also, verify with the debtor to see if there are any penalties or pre-closure fees. Even though most lending platforms do not charge these, it is best to check to see if any exist. Thus, properly examine the loan contract and understand the fees that you may be required to pay in the event of a reimbursement delay, check bounce, and so on.

Conclusion

In the age of digitalisation, lending platforms cannot be banned. However, people can do more than enough by just checking for the above factors before finalising a lending platform.