When does raising a personal loan from fintechs make financial sense? Scenarios explained

Personal loans: It is not unusual to suddenly require funds. You could have a wedding at home, an emergency, or need money for a home renovation. When applying for a loan, it is considered better to approach a bank or a large and reputable non-banking financial company (NBFC).

However, with the availability of a number of fintech apps, your choice of lender is likely to be influenced. If you want instant money in your account, you may want to opt for a fintech app instead of the long process of applying via a bank.

These are some of the situations wherein it is preferable to choose a fintech over a bank.

Opting for fintechs over banks

I. Instant money: Typically, you could opt for a fintech when you need an instant loan instead of waiting for a few days. For instance, there are a few fintech apps which allow borrowers to get money in their accounts within a short period.

II. Ease and convenience: Another advantage is that one can take out a loan quite conveniently since many of these platforms provide a loan with minimal documentation.

However, the borrower is supposed to use eKYC, which is a digital, paperless method of verifying a person's identity and address, using electronic means instead of physical documents. Besides, one may have to show proof of income.

III. Reputable fintech linked to a popular institution: Additionally, one could take a loan through a fintech that is reputable and linked to a large NBFC or a bank, making it more credible.

IV. Low amount: Generally, fintech lending apps provide loans when you need a smaller amount, say ₹25,000 or ₹50,000. Banks, on the other hand, provide loans for a higher amount.

V. Moderate or low credit score: Banks generally insist on a higher credit score. When your credit score is moderate or low, you can approach a fintech app since the chances of loan approval would be higher.

Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.

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