Digital and Paperless Personal Loans: The Future of Consumer Lending
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The push by both the government along with a new-age digital consumer base to build a robust cashless and digital economy has led to a major transformation in the way consumers access various banking services today. The process of lending, for one, has evolved considerably to facilitate much easier discovery of loans as well as a much simpler process of applying for loans and products like credit cards online.
The launch of India Stack by the Indian government, a set of open APIs like eKYC which allows financial companies to perform the Know Your Customer (KYC) verification process digitally using biometrics or mobile OTP, as well as eSign which enables applicants to digitally sign and submit documents, has lent a considerable edge to the alternative lending segment. As a result, digital marketplaces which connect credit-seekers and lenders are constantly enhancing the efficiency of the lending process by making it quick, seamless, and more importantly, paperless for consumers.
Advantages of Paperless Personal Loans
Digital personal loans and paperless transactions are the future of banking, augmented further by the latest cutting-edge technologies and a relaxed regulatory environment. With digital loans and alternative lending platforms, borrowers can apply for loans anywhere and at any time, irrespective of whether the bank that lends to them is present in their geography or not.
In addition, the absence of intermediaries in the process makes online, paperless loans a much more dynamic and convenient option for borrowers who may have urgent financial requirements, since they are spared the hassle of undergoing slow, and almost bureaucratic processes. At the same time, digitisation of end-to-end processes eliminates the chances of human error, as the processing of applications as well as credit underwriting is overseen with the help of technology.
How do Paperless Loans Work?
With access to modern digital tools and efficient technological solutions like India Stack and open APIs, digital lending platforms are partnering with leading banks and NBFCs to create effective lending solutions for borrowers. In order to ensure greater accuracy in customising loan products for consumers, these platforms employ AI and data analytics algorithms to perform a comprehensive analysis of the various loan products offered by lenders such as banks and NBFCs and correlating them to the specific requirements of borrowers to pick the most optimum product for them.
Anyone with access to the internet and a computer or smartphone, and relevant government-approved identification like PAN card, Aadhaar, voter ID, etc. can apply for a loan online. Digital lending platforms have an online application process wherein borrowers can directly fill in their details and upload documents on the portal. Borrowers simply need to scan and upload their personal documents such as address proof, identity proof, bank statements, and salary information online. This is a one-time process wherein lending platforms store the borrower’s information in a secure manner in a centralised database, which they can access when customers want to avail additional credit or other lending services. At the same time, automation and deep analytics have made the verification borrowers’ details as well as assessing their creditworthiness not only much simpler and faster but also considerably more accurate than ever before.
Further, as the digital signature feature allows applicants to e-sign the documents, the entire transaction is completely paperless, thus saving them the trouble of downloading and filling a physical application and then forwarding it to the lender. Moreover, with paperless digital loans, borrowers also do not need to visit the bank since the entire process, from applying for credit to disbursal of loans is conducted through digital channels.
So, while it usually took weeks, or even months, in the past for borrowers to have their personal loan applications approved through banks, instant loan approvals are finally a reality for credit-seekers who can receive the funds in their bank accounts in as little as 24 hours. More importantly, though, the evolution of digital lending and paperless personal loans has been a boon for a large number of salaried and self-employed individuals in the country who were denied credit due to poor CIBIL scores or the lack of an adequate transaction history with banks and financial institutions.