What to know before applying for a personal loan online – Forbes Advisor INDIA

The growth of fintech in India has led to the adoption of the concept of digital lending. Digital lenders have made the loan application process easier by simplifying various eligibility criteria. Here are the key things you need to know before applying for a personal loan online.

Steps to apply for a personal loan online

Select the “good loan”

The right loan is the one that suits your needs. When applying for a personal loan, you should be aware of the

  • Interest rate
  • Repayment Terms
  • Additional costs

The focus should not only be on low interest rates and hassle-free repayment structures, but also on reading the fine print.

Use a Monthly Payment Calculator (EMI)

The EMI calculator provided by online lending platforms has become a powerful tool for customers. It helps to understand and establish an estimate of the monthly repayment amount, the repayment term and the total amount that one can afford to pay. It also gives you a clear picture of the loan amount you are eligible for based on an individual’s monthly income and expenses, i.e. overall cash flow.

Gather all documents

Apart from the loan application form, you need to gather a set of a few other documents to complete their know-your-customer (KYC) process. The KYC process is a personal identification process and is mandatory for the credit companies to know better all the details of the customer.

Usually, the documents required for a personal loan include:

  • Proof of income such as payslips or tax returns
  • Proof of age such as passport, Aadhaar card or birth certificate
  • Proof of address such as electricity bill, telephone bill or ration card
  • PAN card and photo ID proof
  • If you are interested in a business loan, some additional documents such as proof of business continuity, proof of ownership, goods and services tax (GST) declaration details and credit score may be required .

Fill out the request form

To fill the loan application form, just visit the lender’s website. Select the loan type and tap “Apply Now” at the bottom of the screen. An application form, requesting details such as full name, date of birth, and contact details, among others, will appear. Once you have filled in all the necessary information, you can submit your application form.

What Makes Online Personal Loan Application Convenient

Loan approval

This was usually the tricky part where you expected to wait weeks and fill out multiple forms. When you apply online, the possibility of this wait being shorter is much higher. Most online lenders boast of contacting potential borrowers within 5-10 minutes of approaching them. Verification is often performed immediately and subsequent approval information is transmitted. If approved, some lenders are able to disburse the loan amount within 72 hours.


Traditional banks and financial institutions require applicants to submit a long list of documents to be considered for a loan. Organizing all the paperwork is sometimes tedious. Digital lending platforms reduce this hassle and instead request documents that need to be submitted digitally or verified through real-time service API integrations. Clients must scan and upload these documents to get their loans approved and checked by sophisticated fraud filters. This method works for digital-savvy consumers.


A key difference between conventional lending institutions and technology-driven platforms is the flexibility in the amount of credit offered to borrowers. Generally, a traditional finance company considers any loan amount less than INR 1 lakh to be risky. Fintech companies have based the valuation of unsecured loans, which refer to loans granted without any collateral, on the creditworthiness of their client. These loans range between INR 25,000 to INR 5 lakh or even more.

As customers increasingly gravitate towards digital lending platforms to obtain convenient loans, the market has witnessed a meteoric growth of such organizations. Even though the presence of a plethora of options tends to spoil the choice, people should be careful while selecting their digital lender. Before making your decision, here are some

Precautions to take before applying for a personal loan online

Compare interest rates

Each lending company offers different interest rates, depending on the type of loan, the principal and the term of the loan. Before settling on an option, borrowers should compare and evaluate to opt for the lowest rates. If you are unable to do this yourself, several websites can help you find a lender that meets your requirements.

Take note of all fees

Loans involve many hidden costs, which can hinder the borrower in the long run. It is essential to read the fine print and be aware of any other additional charges that one might incur. Some of these costs come in the form of processing fees, prepayment fees, or late payment fees. By knowing all the other ancillary costs that the lender has included, customers can estimate the expenses they will incur over the duration of their loan term.

Verify authenticity

With a sudden increase in the number of digital lending platforms, the risks of fraudulent activities have also increased. Before using an online lender, individuals should verify the legitimacy of the platform. Fanciful offers and false advertisements should be avoided.

For example, some lenders offer their borrowers a variable interest rate. These rates may seem low compared to others at first. However, they gradually grow to such a large amount that it leads to unnecessary depletion of your financial resources. Some lenders even hide the fees in the fine print. Thus, thorough verification is a must before selecting your digital lending platform. Always opt for lenders who are transparent and clearly state their rates, fees and other formalities.

Read all documents carefully

Individuals should concentrate on reading the documents provided by the lender. These documents usually contain information such as terms and conditions, repayment rules, interest rates, additional fees and charges, among others. If you don’t understand what each of these terms means, it could lead to unnecessary problems in the long run. Only lenders should be trusted who provide their borrowers with all essential information in detail and well in advance.

Avoid submitting your loan application to multiple lenders

Each time a customer submits a loan application, the lender checks the borrower’s credit report to ensure their creditworthiness. Such requests are considered difficult inquiries and are included in the applicant’s credit report. These additions can reduce his overall credit rating by several points. If several such requests occur in a short period of time, they can have a negative impact on your overall creditworthiness.

To avoid such a situation, consult online financial markets to assess the best loan opportunity based on the borrower’s current score and capacity. Since credit score inquiries through these marketplaces are considered informal inquiries, they will not affect your credit score.


The transition from offline loan application and approval to online application has been largely driven by various technological disruptions. Technology has made the whole lending process more convenient, easy, transparent and trustworthy.

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