Personal loan in a few minutes, How NBFCs are changing the way we apply for a personal loan?

Author : Phocket Loan | Published On : 04 May 2022

Traditional gatekeepers continue to be the market leader in the lending space (of personal loans, short term loans, etc.), but now they have some company. The company is both in the capacity of support & competition. Technology is disrupting every space & money is what it makes. More of what you would make without Tech. Then how about Tech in financial markets? Here comes Fintech.

The Fintech Market:

Technology has long been associated with helping financial industries function better and make more and more money for “itself”. Here is the catch — it took too long to reach or serve the public. Commodities & derivatives trading & investment banking are some verticals that were leaders in technology adoption even before disruptions like COVID. The lending space, however, lagged. Even to date, many clerical works to loan applications at a bank require tedious follow-ups & frequent visits. Anything can happen instantly & online, like a Demat account opening, but what about applying for a personal loan online or the concept of instant loans? Let us see how Fintech is changing the space, finally.

How is it happening?

Contrary to the popular conservative belief that a life without any debt is the most mentally peaceful one, Economists argue (& with data in hand) that the more the debt penetration in the economy, the higher the growth opportunities. Simple analogical understanding will be that financial support gives an individual or a family the much-needed push to come out of vicious poverty or low-income cycle and exercise better options. Let us see the numbers now.

India is one of the world’s fastest-growing economies. It has the world’s 2nd largest population and also the youngest. In 2021, the loan market grew to a whopping INR 157 Lakh Crores. Retail (which constitute personal loans, short term loans) & Commercial Loans made for 49% each of these, while the balance of 2% was for microfinance loans of up to INR 1.5 lacs. The growth of these segments has been phenomenal over the last 2 years, with each of them growing 91%, 157% & 93% for retail, commercial & microfinance segment, respectively.

Commercial loans, as the name goes, are for business houses. They are of substantially massive amounts and are sanctioned mainly by a consortium of banks against orders received, inventory, assets, etc. Retail loans are given to individuals. They are of two types two — secured & unsecured. By the literal meaning, secured are the ones backed by collateral security & hence, lower rate of interest (ROI). A few popular examples being of Housing Loans and Car Loans. Unsecured are not backed by any collateral and are thus of higher risk to the bank. As a result, the ROI is higher too.

Personal loans form a part of the retail lending segment — unsecured. Personal loans are generally taken to meet emergency expenditures like medical or for events whose cost is higher than regular income, for example, marriage. Best personal loans are now available over the internet, where you can apply for a personal loan online. Short term loans are a feature of it, with the amount ranging from few thousand to around 2–5 lacs. Fintech is revolutionizing this space, with PHOCKET being one of the leading players to get instant personal loan online. Getting instant personal loans online has been made possible now with the stringency of eligibility being relaxed. We shall read more about instant personal loans as we advance.

Role of technology: 

Now we shall get into the nitty-gritty of the architecture that makes this all possible. Online loan applications are processed instantly with artificial intelligence (AI) technology. But this is just one leg of this octopede or decapede. These best personal loan offering fintech startups also use the hybrid cloud technology, which gives banks and other financial organizations cloud computing speed and public and private cloud resources. It significantly cuts down on the cost & time. All of this, mind you, come with top-level security levels, governance, and compliance with laws & regulations. The next leg of applied technology is called Application Programming Interface (API). To explain in simple words through an elementary example is the use of Google Maps by Uber, Ola, Zomato, and Swiggy. They all need GPS, of which google maps is the leader. Hence, utilization of information gathered by one company by all who need it. They are sharing resources & costs, cutting down on time and efforts. The online personal loan fintech companies collaborate with APIs to get centralized data like bank records, credit history & other details of the borrower. The final piece of the jigsaw is the blockchain technology, which we know more about through cryptocurrency or the more familiar term bitcoin. To attempt another simple explanation, a blockchain is a series of ledgers not controlled by a central authority, to trace transaction history by any participant. It is supposed to be the most democratic, cheap, and safe method of storing data and conducting financial transactions. Thus, personal loan issuer companies that perform the entire process online use a coherent mix of all this technology, plus some more like Robotic process automation (RPA) which makes getting instant personal loans possible.

Instant personal loan apps are faster and easy to use:

Apps like PHOCKET — Instant Access To Cash have made life easier for a lower or middle-class earning individual to have financial support in times of need. Apply for a personal loan online, and dousing emergencies can be possible. Get instant personal loan by uploading a few documents and waiting for a few hours to get approval and credit into your bank account.

Best personal loans or short term loans are made available with reduced eligibility criteria.

Banks used to deny any support to persons with less than 700 or even 750 credit scores. Such is not the case with online personal loans. The earning criteria are relatively low, and there is also a possibility of including people employed in the unorganized sector. Apply for a personal loan online without visiting multiple banks multiple times. The fintech revolution for the public is here, finally.