Sethurathnam Ravi

Digital Lending: Things to keep in mind while taking a personal loan online

Although like traditional loans, digital loans include an interest rate, experts suggest consumers should use discernment before proceeding with any transaction.

Personal loans are serious business and should not be approached lightly. These loans may make life easier, however, experts say there are a few things that every customer should be aware of before availing of the facility.

S. Sethurathnam Ravi, Former Chairman of BSE says, “Digital lending is the practice of obtaining a loan using an electronic app or website. These loans are classified as personal loans and, unlike traditional loans, are delivered mostly by fintech businesses rather than banks.”

Although like traditional loans, digital loans include an interest rate, experts suggest consumers should use discernment before proceeding with any transaction.

When it comes to loans, it’s always important to know what your spending limit is, and never spend more than that while taking out a loan for these modest purchases. Ravi explains, “Consumers should tally all of their costs before deciding on the maximum number of personal loans they are ready to accept. One’s EMIs are heavily influenced by the amount of loan one takes out.” Note that these EMIs should be far lower than your salary/income so that you have some savings as well as adequate money for unexpected expenses.

Maintaining a solid credit score or credit history is critical when applying for personal loans. The CIBIL score has a scale of 300–900, with a score of 750 or more regarded to be in the excellent range.

Similarly, Ravi points out, “lender verification should be a priority since financing may require you to provide certain sensitive information that, if it falls into the wrong hands, can have major consequences, including identity theft. There are representative examples that have been vetted, examined, and are subject to RBI laws.”

Above all, industry experts say keep a watch out for any big RBI regulations that arise in the press, particularly those relating to digital lending. “Consumers are always urged to visit a licensed CA if they are unsure about the collateral risks that come with any type of loan. Practising prudence is an advisable call when dealing with digital lending or borrowing,” concludes Sethurathnam Ravi.

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