During the COVID-19 pandemic, people had to use online services as most institutions were closed due to the lockdowns. The lending sector was affected badly due to this and people had to approach the digital lending platforms for loans during their time of need. When compared to conventional loans, online digital loans were much easier to apply, pass the credit underwriting process, and get approval. Thus, they became widely popular among people. Let us discuss the benefits of getting a digital loan.
Reasons for the Popularity of Digital Loans:
The Application Process is Simple
When an individual went to apply for a conventional loan, they had to follow a strict procedure to apply for it successfully. From bringing a photocopy of documents, standing in queues, and waiting for a long time for the completion of the credit risk assessment. Only after these steps would one know if they can get a loan from the lending institution or not. When it comes to digital loans, the borrower can apply for them remotely through the internet. The loan applicant just has to provide their basic details and photos of identity proof. This process is mostly automated and takes little time to complete.
Lenient Loan Underwriting Process
In traditional loan applications, the credit score of the individual matters a lot during the loan underwriting process. This procedure is disadvantageous, especially for people who do not have a proper credit history. In a digital loan application, the lenders also consider other factors like the alternative data for the loan underwriting process. It comprises data like their e-commerce history, online searches, social media activities, etc. It allows people who lack a credit history to apply and get digital loans for their needs.
Flexible Repayment Options
Another benefit that you can receive from opting for a digital loan is that the monthly installment options are more generous and flexible than the EMIs of conventional loans. Digital lending platforms provide loans of up to five lakhs to employed individuals. Moreover, the borrower can select the term of repayment which is generally between six months to two years. Combined with the use of alternative data for the loan underwriting process, digital loans will appear as a more attractive loan option.
Digital Loans Benefit Lending Institutions
Apart from the loan applicants, even the lending institutions benefit from providing digital loans. As borrowers apply remotely and submit their documents or alternative data online, a lot of money, manpower, and time are saved because of this automated process. Even the credit underwriting process is done with the help of artificial intelligence algorithms and machine learning models, which makes them more accurate and free from human error. It gives lending institutions the opportunity to invest their saved money and manpower in other departments where they are needed the most.
These are some of the benefits of digital loans. You should look for verified and trustworthy digital lending platforms or applications before you apply for a loan from them.
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