Many people gravitate
towards digital loans, as these have a quicker loan underwriting and approval process when compared to regular loans given by
banks and other lending institutions. Yet, there are some points that we should
keep in our minds while applying for a digital loan. These are as follows.
You need to remember these
points before applyling for a digital loan
●
A high credit score will
be helpful: Although most digital lenders put focus on alternative data for a
simpler and quicker loan underwriting process, having a high credit score is a
bonus here. The loan applicant will get additional benefits during the loan
disbursement process if they have a high credit score. A credit score makes it
easier for the lenders 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.
●
You should know your
financial limits: Although it has become easier to get a digital loan quickly, one should also
remember that paying it back can put financial burden. Most people commit a
mistake by not checking beforehand whether they can or cannot pay the equal
monthly installment (EMI) of the digital loan. You must always check if you can
afford to pay back the digital loan before applying for it. Otherwise if you
default on the monthly debt payments, your credit score will get severely
affected and even lower your chances for future loan underwriting process.
●
Get only the required
amount: While applying for a digital loan, people sometimes take out loans
which consist of a much larger amount than the needed money. This can put an
additional burden on their finances since the lending institutions are also
charging interest on that extra amount. If you take out a large amount of
digital loan and choose a long tenure to clear it, you need to pay back more
interest to the lender. You should always use an EMI calculator to see the
amount you have to pay each month for the digital loan. You should get 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: As stated earlier, many digital lenders and other financial
institutions have started using multiple data factors for the loan underwriting
process. Apart from credit scores, the use of alternative data of the borrowers has become more prominent in the underwriting
process. It includes data like the payment history of bills, mobile recharges,
online shopping data, social media activity, etc of the borrower. Digital
lenders and financial institutions use this data to check the creditworthiness
of the digital loan applicant.
As the lender checks the
credit risk of an individual before giving out a digital loan, it is also the
responsibility of the borrower to check the factors mentioned above before
applying for a digital loan.
