Fintech or financial technology is revolutionizing the way Indians access their financial services - essentially in aspects of banking, insurance, and loans. One of the most transformational areas of this fintech wave has been the rise of digital lending, a streamlined way of applying and managing loans online. As a result, the number of new digital lenders has increased.
Now, the process of applying for and securing a loan is simplified because of online lending, and this loan application process has become more accessible and inclusive than ever before. This blog explains the online lending process of loans in detail.
What is Online Lending?
Online lending allows individuals to apply for and receive loans entirely online, eliminating the need for a physical visit to a bank or financial institution. Borrowers can complete every step via digital platforms, from application to repayment. This approach has become highly popular among younger, tech-savvy borrowers who value its speed, convenience, and flexibility. The growth of smartphones and expanded credit options have fueled a rapid expansion of digital lending in recent years.
How Does Online Lending Work?
The digital lending process is straightforward and can often be completed in a few clicks. Borrowers submit their details and necessary documents online, after which their application is processed. Approval typically occurs within hours or days, and the funds are transferred directly into the borrower’s bank account. Fintech companies use real-time data to make faster, data-driven lending decisions, often leveraging EMI plans. Using financial and transactional data and an API-driven approach, fintechs speed up the loan process.
The Growth of Online Lending in India
At a global level, the online lending market is estimated to reach a valuation of US$ 34.13 billion by 2031, as per a study by Coherent Market Insights.
At a country level, digital lending has been growing rapidly in India- from a 9 billion dollar market in 2012 to nearly 150 billion dollars in 2020, and projections point to an estimated 350 billion dollars by 2025. Fintech companies and NBFCs (non-banking financial companies) in the country are driving this growth as they use technology to offer quick, accessible, and flexible loan services to cater to the evolving needs of customers.
The Perks of Going Digital with Your Loans
The following are the key benefits of applying for loans from online lending platforms.
1. Streamlined application process
Centralization and digitization of customer information enhance transparency levels and reduce the time needed for approval.
2. Efficient Data Management
Digital customer information enhances easy access and ease with which the borrower's data can be updated, a process that makes procedures straightforward while eliminating the risk of errors and hastening the decision-making process.
3. Enhanced analytics and decision-making
Digital lending services use analytics tools to reduce errors in the credit evaluation process while improving decision accuracy and quality insight for risk management and loan product optimization.
4. Mobile-Friendly Lending and e-Signing
Loan management of today's borrowers, along with the execution of e-signing of documents, is best done online. These features ensure that lenders can attract mobile-first users, especially Millennials, who prefer digital over in-person processes.
5. Expanded Accessibility to No-Credit Borrowers
Traditional credit scores do not favor loan access for many parties, especially first-time borrowers. Online lenders usually rely on alternative data sources, making loans more accessible for individuals with limited credit histories.
6. Available 24/ 7:
Most online lending websites allow you to make applications any hour of the day; that way, you can secure funds even when the banks are closed or on off days (like holidays).
7. It Helps Build Credit with Timely Repayment:
If done responsibly, an online loan will raise your credit score because, normally, payment records are sent to the credit bureaus.
Online Lending or Traditional Bank Loan? Comparing Today's Loan Options
1. Application Process
• Online Lending: Everything is handled online with a very quick approval process and minimal paperwork.
• Traditional Lending: Normally requires you to visit the branch; it will take much longer time to process the loan.
2. Funding Speed
• Online Lending: Quick, often with instant transfer of funds.
• Traditional Lending: Has more time-consuming procedures and, hence, takes more time to disburse a loan
3. Credit Requirements
• Online Lending: Made through alternative data sources, which enables them to disburse loans, even if borrowers have no traditional credit history.
• Traditional Lending: This depends upon the client's traditional credit history and scores.
4. Customer Experience
• Online Lending: Is much easier, with convenient access and a very personalized approach
• Traditional Lending: Usually is limited in Digital options, requiring more in-person interaction.
5. Loan Amounts
• Online Lending: Typically offers customizable loan amounts from smaller amounts up to even Rs. 5 lacs.
• Traditional Lending: This usually offers greater amounts by using fixed loan products.
6. Risk Analysis
• Online Lending: This makes use of automated algorithms and technology to assess risk quickly.
• Traditional Lending: It builds on a higher chance of risk based on traditional, manual underwriting.
7. Interest Rate
• Online Lending: Online lending will likely yield lower rates since overhead costs are reduced.
• Traditional Lending: It might have a slightly higher rate due to increased overhead costs in operations.
8. Repayment Flexibility
• Online Lending: It would most of the time, provide flexible repayment options to meet the convenience of borrowers.
• Traditional Lending: Most of the time, repayment terms are quite rigid.
9. Collateral Requirements
• Online Lending: The vast majority of loans issued under this category are unsecured, which means no collateral is needed.
• Traditional Lending: It largely involves collateral, especially for higher loan amounts.
Overall Reflection
Online lending has become a cornerstone of fintech innovation, offering unprecedented convenience and access to credit. It enables individuals to borrow quickly and more flexibly than would be possible with traditional financing options and has thus far been very successful in fostering financial inclusion in India. With time and development, digital lending platforms are shaping the future of borrowing to be easier, more transparent, efficient, and widely accessible.
StashFin is one such platform that offers loans online. With StashFin, get quick and easy access to funds at competitive rates - trusted by thousands as the best online lending solution. For hassle-free loans with instant approval and flexible terms, StashFin stands out as the ideal online lending platform.
Disclosure: This is a sponsored guest post by stashfin.
