Banks and financial institutions often sanction loans, based on credit report/credit score and source of income. This makes it difficult for students, freelancers and gig workers to get approval for the same. Students may not have ready sources of income and freelancers, regular income.
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To solve this issue, new age lenders are coming up with innovative lending options. Let’s take a look at some of them:
It is a financial startup company launched by a group of millennials. Irrespective of whether the individual is a part time worker, freelancer or self employed, loans are offered to them. It is a lending company designed exclusively for first time lenders. Most of their customers are first time credit users. Therefore, their policies and products are designed accordingly.
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Students in college have their own set of expenses. From educational requirements to birthday parties, their financial needs vary. Mpokket offers small credit options to students with absolutely no source of income. The process of getting the loan is very simple.
After downloading the app from Play Store/App store, the student must register the mobile number. After registration, basic documents must be submitted. Once the documents are verified, the students can avail the loan.
Generally, the amount required by students is not large. Due to this, loan options are available mostly in small amounts. The average borrowing size on mpokket ranges from Rs 500-2000. The maximum limit can go up to Rs 20,000 depending on special needs and emergencies. The loan repayment period is generally 3 months. Mpokket focuses on customers with low monetary requirements.
Another attractive option available with these new-age lenders is that there is no minimum amount due concept like credit cards. If a borrower is unable to repay the whole amount, then the outstanding amount can be converted to monthly EMIs. EMI tenure is up to 18 months.
Interest rate charges on the outstanding loan amounts are 3.5% for students. This is in line with the credit cards. For first time borrowers, as the amount borrowed is as low as Rs 500, interest charges on the same are minimal. This means less stress involved in loan repayment for students.
Along with ensuring the easy availability of credit to students and other untapped categories of society, these new-age lenders also provide a number of options like traditional lenders. Credit cards and no cost EMIs are free.
There are no hidden charges or interest attached. Similar to traditional financial companies that offer no-cost EMI for purchase of merchandise, these new lenders also offer the same.
They have partnered with major online market places and offline stores to provide no-cost EMIs for up to 6 months. In this case, no extra cash is charged on the customers. However, for cash withdrawals, a processing fee along with interest is charged. This can range from Rs 50 to Rs 500.
Lending cash without any collateral is called unsecured lending. It is a risky business. As an edge against this risk factor, new lenders assess customers on a number of parameters. Non-traditional data points like social networks are often monitored. Also, these new lenders are using innovative methods to improve the accuracy of their predictions of the borrower’s behavior. Creditworthiness is measured using a combination of artificial intelligence and machine learning.
For example: While registering, customer’s interaction with the platform is observed. This includes time taken to submit documents, whether the submission was initiated by the customer or as a result of promoting and so on. Such observations along with artificial intelligence and machine learning have helped these new lenders to conclude on a customer’s risk profile.
Although credit options are increasing, it must be kept in mind that, no amount of credit must be borrowed unless there is a need. All the terms, conditions, costs and repayment schedule of the credit amount must be thoroughly observed before subscribing for it. Borrowings that exceed your capability of repayments must be avoided. This will otherwise have a negative impact on your future borrowing ability.
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