Instant loans: how consumers can finance the personal needs of new age finance companies

Instant loans mean that the funds are credited to the customer’s account immediately after their loan application. This includes a smooth customer journey and simplified underwriting in many cases, in addition to lightning-fast turnaround time. Usually, banks take a few days to process a request. However, with the emerging use of technology, data and analytics, several new age institutions have emerged that have lowered the barriers, thereby allowing clients to access loans instantly. These companies use digital platforms to create, subscribe and maintain customers. The new age platforms that create and execute loans digitally are called fintech companies.

It took Aditya Kumar, 38, a Mumbai-based sales manager 10 days to secure a Rs 5 lakh personal loan from a private bank for her marriage about four years ago. 3 years later, while still paying the EMI, Aditya wanted another loan to go on vacation. He applied to a fintech platform where he got the loan instantly. Later, Aditya took advantage of a supplement to repay her previous personal loan and consolidated her NDE into one loan.

Aditya is no exception and many young professionals, especially millennials, are accessing instant loans to meet their consumer finance needs. There is also a change in the structure of loans, with clients preferring short-term personal loans to finance vacations, weddings, consumer durables, and other lifestyle requirements.

Today, obtaining a loan is faster and easier than ever; However, this can push a customer into a debt trap. It is important for customers to ensure timely repayment in order to build a strong credit history that will help them get loans faster in the future at better rates.

There are significant benefits to getting a loan from the new age fintech platforms that run on data, analytics, robust technology, and customer experience. These companies access traditional and incremental alternative data for digital underwriting and creating personalized loan offers.

There are various advantages which make Fintech platforms the most preferred option for obtaining instant personal loans. Some advantages are below:

1. Fast and convenient process: The application process is almost entirely digital, and loan decisions are communicated to clients instantly. Super simple and convenient interface. This saves a lot of time and effort with the process completed in just a few minutes.

2. Personalized offers: While traditional banks and NBFCs follow the conventional method of underwriting loans, new-age finance companies are more flexible, faster, and offer personalized offers to customers. Offers start as low as Rs 500 and can go up to Rs 25 lakh. The loan term and return on investment are also flexible and personalized. These personalized offers are the result of advanced subscription algorithms that combine traditional and alternative data.

3. New in the credit segment: First-time loan clients have no repayment history and are not part of the credit bureau. These are mostly young professionals, millennials who are looking for a personal loan to manage their financial needs and lifestyle demands. The use of demographics and alternatives, adoption of analytics tools and artificial intelligence techniques help new age businesses to underwrite these customers and provide them with loans. Customers can then establish their repayment history on the credit bureaus.

4. Digital Refund and Service: These platforms provide clients with flexibility and process ease to repay their loans through various digital instruments such as debit mandate, e-NACH or payment gateways. Service and interactions with customers are also managed digitally through their mobile app / website / chatbot etc. It is a big step towards convenience and cost reduction.

The eligibility criteria for instant personal loans from fintech platforms are generally as follows:

# Age – Most Fintech platforms serve clients aged 21 to 55
Income – There is a basic income test for all of these businesses, most requiring a minimum monthly income of Rs 15,000.

#Job – Most fintech platforms look for job details and roughly the same stability. The stability criteria are different for different lenders, however, this information is essential for underwriting and approval.

# Document Requirement – Customers must provide their KYC documents including PAN, Aadhaar card, etc. along with their pay stub / bank statement which is verified online to provide instant credit decision.

Fintech platforms have changed the way lending happens and they have become very popular with clients in no time. The growing influence of fintech platforms in the financial services industry boosts operational efficiency and drives innovation. Fintech platforms contribute to financial inclusion by providing instant and personalized loans for various consumer needs such as vacation and wedding expenses to “new credit” customers. One can avail these loans from various players.

(By Pratyush Chandramadhur. Author is Head of Consumer Products, Clix Capital)