Different ways to get personal loan in India
Different ways to get a personal loan in India
Taking a personal loan isn’t just purely a financial decision. It is an emotional one too. At some point or the other, many have been in a situation when they absolutely were in dire need of money. There are multiple options to get money – from your family members to your bank, to new age solutions like. But why not take your finances into your own hands and try out an online peer-to-peer lending platform?
Your financial goals can vary – from planning your destination wedding, pursuing higher education abroad or even paying for family medical emergencies. Whatever your goals are, quick and easy access to a personal loan can help alleviate some of the emotional stress associated with a personal loan. Let’s analyze all the options you have.
#1 – Loan from colleagues/social networks
This option finds itself in this article owing to cultural reasons. Communities being close-knit in India, we’ve always had someone to go to when we’ve needed money. Over time, many have taken to social networks to crowdfund their loans when the need arises – from colleagues, acquaintances, or more. But on closer inspection, this isn’t really as rosy an option as it sounds. Here’s why:
- When requiring large amounts, borrowing from friends can be impossible, or at the risk of your social equations with them.
- Over time, the number of people relying on immediate friends for a loan has continued to decline. Therefore, this option has become one that is increasingly less prevalent.
#2 – Getting a personal loan from banks
A key element of a personal loan is that it is given based on your promise to repay. For example, if you’re borrowing money for a trip to Goa from a family member or a friend, they are likely to lend you based on their trust in you. When you go to a bank, they check your credit score. A credit score is your track record of repaying your loans. But it comes with its own set of issues:
- It can take a long time to build up a good credit score in the eyes of a bank. Processing your required paperwork to get a loan from the bank is a waiting game, that could even take months!
- The interest rates on personal loans are typically high when borrowing from a financial institution, depending on your net worth. The total worth of the assets that you own, your liabilities — everything is taken into account by a bank.
- The banking system, in many ways, keeps those without access to assets away from getting a personal loan easily. That is, if you don’t happen to own too many assets and want to take out a personal loan from a bank, it will certainly be an uphill battle. In this case, the amount that you can borrow varies depending on your credit ratings. Banking systems are incentivized to serve people with better ‘repayment credibility’ first.
Let’s take a look at an alternative way to get a personal loan.
#3 – Getting a loan from a peer-to-peer lending platform
P2P Lending is a great platform to take a personal loan online even Better than any Banks or NBFCs! Today’s technology gives us an increasingly wide number of options in the Fintech space every day. To avoid high-interest rates and yet be able to get your desired personal loan online without the hustle of financial institutions might seem impossible. But that’s where a peer-to-peer lending platform, such as i2iFunding, comes in. The concept is one of the easiest ways to secure a borrower-friendly Personal loan online in no time. Let’s understand this better:
What is peer-to-peer lending?
Peer-to-peer (P2P) lending allows you to take a personal loan online without an official financial institution as the middleman. Remember the banks? Don’t. Forget them. You’re no longer borrowing the lenders’ money via the banks. You’re borrowing it directly from other individuals willing to lend to you.
With peer-to-peer lending, borrowers can take loans from individual investors who are prepared to lend their own money. A borrower’s profile is displayed on an online platform. Investors can then pick and choose whether they want to lend to that particular borrower. The entire process takes place online, where both lenders and borrowers register themselves on a credible platform and get connected.
- P2P platforms hook up borrowers to investors willing to lend at affordable interest rates. A borrower’s profile shows their credit score, and other details – such as Credit history, financial details, professional details and other factors important to making a decision. However, lenders on a P2P lending platform can determine their own level of risk. The entire process is not only fast and user-friendly but also hassle-free.
- With i2i Funding, borrowers can get Personal loan Online at rates as low as 12%. In addition, the disbursement is also done in a significantly faster time. It’s the free market principle at work. If you’ve got a good profile, you’re likely to have lenders competing to offer you their money, which means you’ll get funded fairly quickly!
Online lending is user-friendly and quick in setting up budget loans at attractive interest rates. P2P Lending platforms save you the trouble of having to go to a bank and being on a waiting list to get a personal loan. So to sum it up for you, imagine:
- Getting all the money you need.
- quicker than it would take you from a bank.
- at attractive rates of interest.
- while sitting in the comfort of your home, never stepping out.
- with the money coming directly into your bank account.
This is P2P Lending in a nutshell. It’s a new model that’s understandably taking the economy by storm and is even recognized by the Reserve Bank of India.
#4 – Getting a loan from NBFCs
There are plenty of Non-Banking Financial Institutions across the country that aim to cater to borrowers and edge out banks in terms of speed of access and interest rates. Like a bank, they too rely on factors such as credit scores and banking history to assess potential borrowers. Their interest rates are also higher compared to banks. The entire process suffers from the same disadvantages that traditional banking channels have in general – the rates are not as attractive as they should be, the rejection ratio is too high, and disbursement takes longer than most borrowers would like.
#5 – Loan on Credit Cards
Credit cards are the most prevalent form of loans on the internet. By allowing users to purchase first, pay later, credit cards offer reasonable flexibility to users and instant access to funds. While they do top the speed of access parameter, credit cards can be shockingly expensive for their users. In a previous article, we discussed how credit card companies generate revenue, in these ways:
- Transaction fees (about 60 – 65% of revenue): All credit card holders contribute to this
- Interest income on outstanding balance (about 25% – 30% of revenue): Levied on those who can’t repay outstanding amount in time (in addition this attracts a minimum amount due penalty)
- Other fees and penalties (about 25% – 30% of revenue): This is mostly penalty charges on the overdue amount not paid while rest comes from annual fees paid by some cardholders
Outstanding credit card balances can attract interest rates ranging from anywhere between 43% – 50% per annum. This is far higher than what any bank, NBFC, and of course, any P2P Lending company would ever charge you. In fact, it’s far higher than most investment classes generate in terms of returns as well.
Which One Will You Pick?
So which one is it going to be for you as a borrower? Would it be the rather complicated prospect of borrowing via social networks? Or the difficult and lengthy process of getting a personal loan online from banks, or even the far more expensive credit card option? If you rather avoid both (and it’s obvious why you should), it’s clear you’re headed towards P2P Lending. Get started on i2iFunding today, and get the loan you need, at a rate and time that’s quite frankly, unmatched.