- Date : 02/03/2022
- Read: 5 mins
Avoid These Mistakes While Availing Loans From Fintech Companies
India is undergoing a FinTech revolution, owing to which tons of finance and technology-based companies are opening. They offer lucrative rates and attractive discounts to lure in customers and increase their revenue. There are many legitimate FinTech companies, but we cannot overlook the dark side of this domain. Many firms are set up to scam innocent people who are new to the credit system. Therefore, this post is aimed to help you avoid mistakes when getting loans from FinTech companies.
Mistakes To Avoid While Getting Loans From FinTech Companies
- Not planning a budget in advance
The massive mistake beginners make while thinking about loans is not having a budget. Making a complete budget for every penny of the loan amount should come before you start looking for things to buy. If you have a planned budget before you start, you can evaluate your options better.
- Not evaluating the repayment capacity
The most common mistake people make when taking out a loan is not evaluating their repayment capacity. If you earn less, it is understood that your repayment capacity will be lesser. It's true that we all progress in life, but we should not take higher loan amounts anticipating your growth. There have been cases of aggressive recoveries from many fintech companies, and the loan takers have suffered miserably. To avoid undergoing such circumstances, you should always evaluate your loan payment capacity and then make a move.
Before thinking of approaching a FinTech for a loan, evaluate your repayment capacity. If you don't do this, you'll face big troubles on your way to becoming debt-free.
Not keeping track of the credit score
Having a good credit score is a boon for any financial need. If you have a credit score above 750, you can easily procure unsecured loans and credit cards. Leading FinTech companies follow stringent policies regarding credit scores. So if you aim to procure your loan from FinTech, keep track of your credit score and start building it to have better loan offerings.
Related: Build A Credit Score
- Not updating the KYC documents
KYC documents should reflect your latest information. Make sure you keep all your details up-to-date when taking out instant loans from FinTech. This will shorten your loan disbursal times, and transparency helps you a lot.
If you change any of your crucial details during the loan, get them updated with your loan-providing FinTech.
- Not comparing lenders and interest rates
India is filled with unique FinTech companies, and there's cut-throat competition between them. There are many lending firms, and they all offer exciting interest rates to increase their market share. Not comparing lenders and interest rates is a minor thing you can do. As a consumer, you should indeed check out all the options and choose the one that fits your aims.
- Not knowing about the processing fees or hidden charges
FinTech platforms are new, and some of them impose hidden costs on loans to skim more money from the customers. When you are finalising a loan provider for you, make sure that you don't end up paying extra money in the form of loan processing fees and other shady charges.
The best way to avoid this mistake is by comparing the charges with industry standards and other competitors of your instant loan approving FinTech company.
- Not opting for a suitable tenure
Tenure is everything when it comes to repaying loans. The tenure you select should be achievable and good enough to ensure the smooth repayment of loans. Don't make any decisions about tenure based on assumptions of future growth. When you are getting an instant loan from a Fintech company, ensure that the tenure is suitable. Failing to do so will create an unnecessary burden on all your financial decisions.
- Not checking the repayment modes
FinTech platforms are new, and due to this, they have lesser repayment processors. Some fintech platforms may not have tie-ups with enough banks and other institutions. Due to this, your repayment options will be limited, and you need to check them before opting for loans. Avoid this mistake by taking instant loans only from renowned FinTech platforms.
- Not being aware of prepayment options
When you are seeking instant loans from FinTech companies, check for all the prepayment options. If you assume to have more income for some time and plan to go debt-free sooner, then prepayment options should be your concern. If you end up with a company that charges high prepayment penalties, then you'll be stuck, and prepaying your loan won't make much difference.
- Not reading the fine print closely
Terms and conditions are the best documents for your loan, and you should avoid the mistake of not reading them thoroughly. No one likes to read the terms and conditions document, but you should always read them closely when taking an instant loan from fintech companies. This will help you understand your loan conditions better, and you can know about everything.
Once you take care of these mistakes, you can have a smooth loan disbursal and repayment, even in the long run. So, keep these in mind for a hassle-free financial journey.