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The TransUnion-CIBIL data for January to March quarter revealed that over four million ‘new to credit’ Indian customers have loan-related queries every month. These include consumer durable loans, personal loans, credit card loans, housing loans, and automobile loans. Fintech companies hold a market share of 56% in the ‘new to credit’ or first-time borrowers segment as per this report. As a first-time borrower, the most prominent challenge is to identify lenders willing to lend to you despite limited or no credit history. Traditional banks may have it’s reservations to new customers and fintech companies may fill the gap here. They claim to offer an enhanced, customised, and personalised user experience for each individual.

Difference between fintech and a traditional bank?

Fintech companies use new technology to automates and improve the delivery and quality of financial services. On the other hand, a traditional bank is a financial institution licensed to accept deposits from customers and offers other financial services like loans, etc. While a fintech lender focuses on making the service personal and easy for the customers, banks like to prioritise customer security and management of financial risks. Fintech lenders tend to be flexible with collateral requirements for loan purposes whereas banks have a strict collateral policy.

Is your lender credible?

There are so many fintech companies available on the internet today. In a bid to get maximum traffic on their platforms, these companies offer great deals. Getting a loan has become a matter of few clicks today. However, you must remain wary of ‘too good to be true’ offers and spend enough time to understand the pros and cons of such lending options.

Experts always suggest conducting thorough research about the lending company before trusting any of their claims. You must go through customer reviews and testimonies, read the terms and conditions and evaluate the risks before taking a personal loan from such lenders.

While it might be easy to get a personal loan via fintech companies, banks remain the undisputed kings of credibility. They have a legacy, public accountability, and years of reputation to adhere to. Hence, fintech still needs some time to match up with banks in India.

Look beyond interest rates

Contrary to popular belief, a comparison of interest rates should be the deal maker/breaker in case of taking a personal loan from fintech lenders. Many fintech companies often charge for a zillion other things ( for example, processing fees, prepayment fees and late payment fees) that may slip the borrower’s attention in the initial rounds of comparing interest rates. Therefore, you must read the offer thoroughly and look beyond the obvious concerns. This will prevent any unexpected charges or expenditures at a later stage.

Notice the fine print 

The term ‘fine print’ is used in refernce to the contract terms and conditions, disclosures and other key information that isn’t included in the main loan document. These details are placed in the footnotes or in a supplement document. Understanding the fine print is critical before opting for a personal loan with fintech lenders. Fine print includes the repayment terms and thus becomes even more important for borrowers.

All fintech companies are liable to display all the relevant information regarding credit facility on their websites. But one must be cautious while opting for personal loans through fintech lenders as they’re relatively new in the field.