9 reasons to choose a digital personal loan instead of a traditional one

With the festive season in full swing, various brands, marketplaces, offline stores, etc., have launched numerous lucrative offers on gadgets, consumer durables, and more. The festive season is the best time to buy these. Banks have introduced attractive personal loan offers, including waiver/discount on processing fees, lower interest rates, waiver of foreclosure fees, etc. If you wish to finance the purchase of your favourite gadget or consumer durable that you have always wanted to buy, with a personal loan, this is the best time to do that.

A personal loan can be applied for offline through a bank branch or online through the bank’s website/app. In this article, we will discuss some of the reasons why you must choose a digital/online personal loan over a traditional personal loan (through offline mode).

Reasons to choose a digital personal loan over a traditional personal loan

The digital application process is user-friendly. It guides the applicant step-by-step throughout the entire application process. Some of the reasons why you must choose a digital personal loan over a traditional personal loan include the following.

Apply from anywhere: A digital personal loan application can be made from anywhere through the bank’s website or mobile App. You can apply for it from the comfort of your home, office, or anywhere else, without needing to visit the bank branch. You don’t need to take a leave or time off from work to visit the bank branch to make a personal loan application.

You can apply at any time, without the restriction of bank working hours. An offline application can only be made during the bank branch’s working hours. The online application can be made on a weekly holiday or a public holiday, which is not possible for offline applications.

Eligibility can be checked immediately: With an online application, the applicant can immediately check their eligibility. Banks have eligibility criteria regarding the minimum and maximum age, profession (salaried or self-employed), number of months/years in the current job, minimum monthly income, city of residence, minimum credit score, etc.

During the online application process, the applicant can input the required data for the above parameters and determine their eligibility. Apart from determining loan eligibility, the applicant can check the loan amount for which they are eligible.

Online KYC: Some banks have digitised the entire personal loan application process. An individual can fill out the application form online and upload copies of the required KYC and income documents. The PAN and Aadhaar Card details can be verified online with the NSDL and UIDAI databases.

Some banks have the video KYC process. Once the individual submits the online application form, some banks may provide the link for the video KYC immediately. Some banks may schedule the video KYC. During the video KYC, the individual’s PAN and address proof, such as the Aadhaar Card, are verified. The bank representative takes the applicant’s photo and completes the video KYC.

Digitisation ensures the entire process is paperless with online application and video KYC.

Status tracking: The status of a digital personal loan can be tracked online. The application may go through various stages, like application, KYC, approval, disbursal, etc. The applicant can track the application progress at each stage. If the application gets stuck at any stage, the applicant can check the reason online and take the necessary steps to address it, so that the application proceeds ahead.

Faster processing: The processing of online personal loan applications is usually faster than that of those submitted in person at the branch. In some cases, the loan approval can be instant or within a few minutes to a couple of hours. The disbursal for online applications is also faster, sometimes within a few hours or on the same day itself. Speed, in the form of faster loan processing, is of essence when the personal loan requirement is for an emergency, such as a medical emergency or any other urgent situation.

Tenure options: While filing the online application, an individual can choose from the various tenure options. The tenure options usually range from 3 months to 84 months. Based on the loan amount, interest rate, and the tenure chosen, the EMI is calculated. If the applicant is comfortable with the EMI amount, they can proceed ahead. Else, they can opt for a higher tenure with a lower EMI, which is easier on the pocket.

Lower interest rate: The bank’s cost of sourcing personal loans and other loan applications through digital channels is usually lower than that of traditional modes, such as bank branches. Hence, the bank may choose to pass on the cost savings in the form of lower interest rates and/or other benefits to individuals applying online.

Safe and secure: The entire digital loan application process is safe and secure. Banks deploy the best-in-class security systems to ensure data security.

Good customer experience: While applying for a personal loan online, if an individual gets stuck at any point, they can reach out to customer care for assistance. In some cases, the bank customer care may reach out to the applicant to check if they need any help with the online application.

Points of caution

An individual must exercise caution while making an online personal or any other loan application. They must apply with only regulated entities (banks/NBFCs) registered with the RBI. Unregulated entities may charge a higher interest rate. With unregulated entities, there can be hidden terms and conditions, data privacy issues, risk of fraud, etc. Hence, an individual must always exercise caution when making an online application. Always apply for loans with regulated entities and stay away from unregulated entities.

Online application has several advantages

In this article, we have discussed nine reasons to choose a digital personal loan over a traditional personal loan. The online application is convenient and easy, and can be done from anywhere. The entire process is paperless, with online KYC. The faster approval and disbursal save time, resulting in the borrower receiving the personal loan money in their bank account at the earliest. The applicant can choose from various tenure options and may benefit from lower interest rates. Thus, with so many benefits, when applying for a personal loan, it is advisable to give preference to applying online instead of taking the traditional route of applying through the bank branch.

Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached on LinkedIn.

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