What Is Digital Personal Loan And How Does It Work In India?

In the digital world, it has become easier to apply for a personal loan. There are many reasons for taking personal loans, such as home renovations, medical emergencies, weddings, and holidays. If you have an urgent need for money without disturbing your savings, you can apply for a personal loan online on the lender’s website or mobile application.

What is a Digital Personal Loan?

A digital personal loan is an instant financial solution when you need to make huge expenses. A few years ago, finding a good personal loan deal would entail visiting many banks and financial institutions. Today, the process is faster and more accessible. Digital personal loans have sped up the application and the loan disbursal process. You only need to have filled out the application form and submitted the key documents for verification. After that, it takes a few days for the lender to review and approve your loan. All this happens quickly. You don’t have to waste your time following up in person for an update.

Benefits of a Digital Personal Loan

Easy Online Application and Approval: One can still visit their bank in person and apply for a personal loan. However, many working people can avail of the online application process. First, you log into the lender’s portal. Then you can fill in the application in just a few minutes. Often, you can receive the approval within a few hours or on the same day.

Hassle-free Documentation: The documentation process to apply for a personal loan online is also digital. The application process is hassle-free. All you need to have are the basic verification documents ready to upload.

Quick Disbursal of Funds: First, the lender has to evaluate and verify you as a creditworthy borrower. Once that is done, they will give you the loan amount in a few hours or days.

Collateral Not Needed: Personal loans are unsecured debts. So, you do not have to put up security against them to avail of a loan. That is why it is easier to acquire a personal loan than other loans, such as home loans.

Builds Credit Score: How can you build your credit score if you have a low credit score or no credit history? Getting affordable personal loans and making on-time repayments is a great way to achieve that. Your credit score will increase as you pay the EMIs on time.

How Do Digital Personal Loans Work In India?

Digital personal loans are common in India. It is because they offer flexible repayment tenures. Along with that, you can apply for a loan from your bank’s mobile or web application. Moreover, you can do it without disturbing your schedule. The entire process is done online. It includes the application, approval, disbursal, and recovery. To add to that, if you are pre-approved for an instant personal loan by your bank, you can get a personal loan online in just a few clicks.

All you need to do is keep your KYC documents ready.

Important Considerations Before Taking A Personal Loan

Lender’s Credibility: You may have to pay high EMIs if you borrow without proper research. When you apply for a personal loan, it is vital to check the lender’s credibility. You can only get a personal loan from lenders who are verified by the Reserve Bank of India (RBI). Lenders also need to have a track record of lending.

Credit Score: Credit scores are a measure of your financial health. They consider income, debt, borrowing habits, and repayment history. A score of 750 or higher is often known as a good credit score. This score puts you in the top spot when you apply for a loan.

Terms and Conditions: It is vital to go over the terms and privacy policies before you take out a loan. Make sure to read the terms and conditions in detail when you apply online or offline. These details can seem trivial when you need urgent funds. But ignoring some key points could lead to issues later like higher late repayment fees. Pay attention to points such as the repayment schedule, charges, and default charges.

Tax Implications of Personal Loans

The loan amount is not part of your income. So, generally, there is no tax payable on personal loans. Personal loans do have a tax benefit. There might be tax deductions on personal loans taken for specific purposes, such as buying a house or funding education. Therefore, it is helpful to get a personal loan from a good source and avoid unverified lenders.

Conclusion

When you borrow money, the golden rule is to keep in mind how much you can pay back. You might need 10 lakh rupees to buy a house, but if you should afford to repay this amount. Your existing debts may exhaust your income, making you an unreliable borrower.

Digital lending has revolutionised the personal loan market. The process is now convenient and efficient. Any approved bank or financial institution can give a digital personal loan. An existing customer of a bank with a good financial record can benefit from an instant pre-approved digital personal loan. However, before you opt for a personal loan, plan your debt properly. You should ensure that it doesn’t burden your finances later. Make sure that you take into account all the key details to make the process of taking a digital loan more efficient. Piramal Finance allows you to easily apply for a personal loan online by following simple instructions.