Digital loans have become
quite popular among people during this pandemic. These have a quicker loan underwriting and
approval process when compared to regular loans given by banks and other
lending institutions. Although the application process is simpler and the loan
amount is released quickly after approval, there are some points to keep in
mind while applying for a digital loan.
Check out these factors
before you apply for a digital loan
●
A high credit score will
be helpful: Although most digital lenders put focus on alternative data for
ease in the loan underwriting, the high credit score of the loan applicant provides
a lot of benefits during the loan disbursement process. A credit score allows
the lending body to inspect the creditworthiness of an individual. A high
credit score denotes that the borrower has a good financial record and presents
less risk to the lender. Thus by having a high credit score, the loan applicant
can enjoy benefits like availing of digital loans with slightly lower interest
rates.
●
Check your affordability:
One can easily get a digital loan quickly but this does not mean that one does not have to pay
back the amount or the interest. A major mistake that some people do is not
checking beforehand whether they can or cannot pay the equal monthly
installment (EMI) of the digital loan. Thus before applying, you must check
your affordability criteria. It depends upon the amount of money you have to
pay for your debt payments from your monthly income. Check if you have enough
money left after paying the EMIs otherwise you may have to default on them to
manage your monthly expenses.
●
Get only the required
amount: Since getting a digital loan has become easier, people sometimes take
out loans that consist of a much larger amount than the needed money. They
forget that while having additional money feels good, the lending institutions
are also charging interest on that extra amount. Moreover, if you take out a
large amount of money as a loan and choose a long tenure to repay it, you are
paying back more interest to the lender. Thus use an EMI calculator to see the
amount you have to pay each month for the digital loan. Apply for a digital
loan of that much amount whose EMI you can easily payback and can complete the
loan repayment as soon as possible.
●
Learn about the use of
alternative data: Digital lenders and other financial institutions have started
focusing on multiple data factors for the loan underwriting process. Apart from
credit scores, the use of alternative data of the borrowers has also become more prominent. It includes
payment history of bills, mobile recharges, online shopping data, etc. The
lenders use this data to check the creditworthiness of the digital loan
applicant.
These points show us how
to get a suitable digital loan from online lending platforms. As the lender
checks the credit risk of an individual, it is also the responsibility of the
borrower to check the credibility of the lending platform before applying for a
digital loan.
