Digital lending has proven to be a boon for the under-served customers; however it can also lead to a debt trap if not handled well. The ease of access and the widespread propaganda has pushed the millennial to jump to instant digital loans to cater to their immediate needs and not so crucial needs. 

Digital loans are instant, require no physical documentation and use alternate sources of data to qualify the customers. The entire concept of digital loans is based on the premise of convenience; aimed to reach out to under-served people with genuine need . 

There needs to be enough clarity to consumers that availing a loan is simpler but repaying it is not so easy if they have no clear plan. One can’t help the unforeseen circumstances like loss of a job or a salary delay which could lead to delay in repayment.

Let us run through a few of the habits that a loan consumer can imbibe to repay well: Consider loan as a liability: Irrespective of the source and the amount of loan, it should be considered as an obligation. Be informed about all the clauses, terms and conditions.

1) Change the spending habits well before availing the loan:

Habits take time to change and conscious decisions need to be made to cut down not-so-worthy spends for some time. Remember that each drop contributes to filling an ocean. Plan your future needs:  Be it a business or a personal loan, one needs clear planning and risk assessment, to safeguard from failed installments. The loan providers would have no empathy for your poor planning.

Don’t pay multiple debts simultaneously: One may have taken multiple debts from varied platforms out of urgency or recklessness, but paying them simultaneously would be impractical and challenging. One should try to wipe off the smallest loan first and gradually move up. More often than not, we sideline the fact that everyday clocks interest on the principle.

 

2) Don’t build a debt whirlpool

A debtor feels immense psychological pressure when there is a lot of liability and pressure to repay. They tend to feel at ease by borrowing one loan to repay another one. This may land the user in a whirlpool of never-ending debt. All this affects the credit score of an individual and seeking loans in the future becomes tough as all the lending platforms are woven around the CIBIL and other bureaus that manage credit histories. Poor management of a small amount of loan may land you in the blacklisted category.

3) Don’t pay just the minimum due 

Most consumers fall prey to ambiguous messages for payment reminders. You may be charged interest by the provider even if you pay the minimum due amount. The minimum amount due is generally the amount payable to avoid late payment fees.

4) Monitor your credit history 

For businesses and as well as individuals, monitoring their debt hygiene is a must. Pull out all the statements giving you insight on the amounts you have borrowed, the interest paid for all types of loans whether existing or closed. Try to highlight the source and examine if there could be a way you could have saved yourself from paying huge interests.

5) Opt for auto-debits 

Digital payments can now be paid off through direct debit from the associated bank accounts after assigning the mandate. To avoid delays in repayment, one may set an auto-debit mandate. For business loans, this may not be needed as the digital lenders keep debiting the installments from the gateway they provide to businesses.

 

 

 

It’s good to take loans when there is clear intent and focus to repay. Small businesses may avail of a larger size loan if they maintain a trustworthy credit behavior during their smaller loans. Digital loans if managed well can be a blessing for a repayer with all the above habits.

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