Fintech companies are new age start-ups in the area of financial services that have a technological edge. Also, a week earlier, a story had made rounds that millennials are increasingly opting for loans from these platforms for meeting their travel goals.
Also, these Fintech companies are primarily targeting individuals avoided otherwise by banks such as millennial population who may or may not have a credit history.
Here's how these loans are rendered easy in terms of the borrower:
Drawbacks with traditional lending
While, the interest rate on a loan is decided basis the repayment terms, tenure and the nature of loan being secured, there is an array of documentation and a relatively higher turned around time until the loan is finally disbursed.
Banks usually come up with stringent loan repayment terms.
Collateral is sought by banks in most of the loans except personal loan where the interest rate is high, to offset the risk factor or default by the borrowing party. For small and medium enterprises this may be a bad proposition given the low resources they have.
Individuals, as well as businesses with poor credit history or score or who are negative in their cash flow stream, are not lent money
Positives of fintech companies
Unlike banks, these fintech companies are also known to lend to a borrower without any credit history.
These in comparison to traditional medium harnessing technology are offering loans at better rates due to lower operational costs such as low as 13 %. Mostly such Fintechs operate from an online platform.
After an applicant uploads all the necessary documents, fintech come up with the credit score for the prospective borrower to determine the creditworthiness.
No collaterals are sought in case of fintech loan offerings, so you do not have to mortgage any of your assets.
Usually loans of as low as Rs. 15,000 to as high as Rs. 1 crore is sanctioned by fintech companies basis the requirement and creditworthiness of the borrower.
Loan tenure is also flexible in the sense as weekly or monthly repayments can also be made.
There is maintained complete transparency in the loan sanctioning process, so rest assured of any kind of hidden charges.
In some of the case, interest is charged for the amount used and not for the entire limit.
And also as the medium offers ease, easy loan repayment from your side, will help you improve your overall credit score.