Why A Loan App Is Always Better Than A Bank For Personal Loans

Bydhrishtri parikh

There are moments in every person’s life when they are in need of immediate funds for an expense or emergency. You could use your savings to meet the requirement, or take an instant loan.

Taking an instant loan? Take it from a loan app

Most people’s primary instinct when in need of funds, is to approach their bank for it. It is understandable – most of us have long-standing relationships with our banks and we trust them to help us out. Some banks also have pre-approved personal loans for high net-worth individuals. Hence, the next time you require a personal loan, you might approach your bank instead of using a personal loan app.

But this could turn out to be a mistake, because:

* Contrary to the bank’s claims about ‘immediate loan sanction’, it will still ask for your set of documents, take some time to check your credit score, make you appear at the branch office to fill out paperwork and submit the processing fee cheque, etc. The documents are vetted by the bank’s legal department and this process takes time. This cancels out any chance you may have of getting a quick loan for an emergency

Counterpoint: The best personal loan apps in India offer instant personal loans, i.e. the loan is sanctioned in a few hours of receiving your documents and checking your credit score.

* Then there is the question of your credit score. All banks in India rely on the CIBIL credit rating bureau scores for every loan applicant. The CIBIL score holds for any category of loan application, from instant loans to home loans. The CIBIL score is marked out of 900 points, and any score above 600 is considered worthy. However, applicants with scores above 750 are approved immediately. Meanwhile, applicants with scores below 600 or who do not have a recorded credit score because they have never applied for institutional funding, are not considered for loan approval

Counterpoint: Leading personal loan apps in India are more flexible about approving loans for applicants with low credit scores. Thus, those who are ordinarily rejected by banks may still be approved by a good loan app.

* Banks are likely to charge a higher rate of interest on applicants whose credit scores may be good, but who have a patchy loan repayment history

Counterpoint: Leading loan apps have a uniform schedule of interest rates and processing fees for all applicants, regardless of their background or repayment history. However, any lapses in repaying the loan are swiftly flagged down. If you continue to default on payments, the loan app may initiate legal proceedings against you.

* If the bank rejects your loan application, they may not always specify the reasons for doing so. Meanwhile, you cannot reapply for at least one year till the lacunae that got you the rejection are ironed out.

Counterpoint: Most loan apps let you make a fresh loan request in a few months of rejecting the earlier one.

Get the personal loan on an app…

  • Download the loan app on your smartphone and finish set-up
  • Check loan eligibility on the app with the online calculators, and also the documents list
  • Apply for the loan and keep your set of documents ready for pick-up from your home
  • Await the app’s approval – it must check your documents, credit score and other factors. Once approved, the loan is disbursed to your account in a few minutes
  • Repay the loan in a series of EMIs from your regular income