Personal loans are serious business and should not be taken lightly. These loans can make life easier, however, experts say there are a few things every customer should know before availing the facility.
S. Ravi, former President of BSE, says, “Digital lending is getting a loan using an electronic application or website. These loans are classified as personal loans and, unlike traditional loans, are mostly issued by fintech companies rather than banks.
Although, like traditional loans, digital loans include an interest rate, experts suggest that consumers exercise their judgment before proceeding with any transaction.
When it comes to loans, it’s always important to know your spending limit and never spend more than that when taking out a loan for those small purchases. Ravi explains, “Consumers need to factor in all their costs before deciding on the maximum number of personal loans they are willing to accept. Everyone’s IMEs are heavily influenced by the amount of loan one takes out. Note that these IMEs should be well below your salary/income so that you have savings as well as enough money for unexpected expenses.
Maintaining a strong credit score or credit history is essential when applying for a personal loan. The CIBIL score has a scale of 300 to 900, with a score of 750 or higher considered to be in the excellent range.
Likewise, Ravi points out, “Lender verification should be a priority, as financing may require you to provide certain sensitive information which, if in the wrong hands, can have major consequences, including identity theft. There are representative examples that have been checked, reviewed and subject to the laws of the RBI.
Above all, industry experts say to watch out for major RBI regulations cropping up in the news, especially those related to digital lending. “Consumers are always advised to consult an approved certificate authority if they are unsure of the collateral risks associated with any type of loan. Exercise caution is a good call when it comes to digital lending or borrowing,” concludes Ravi.