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Looking for a loan? Know the difference between borrowing from a bank/NBFCs and a fintech lender


Apart from the difficult processes, there are also some charges involved in the loan-sanction process.

Taking a loan at favourable terms and conditions is not an easy task. To get an unsecured loan at a lower rate, a borrower needs to have a clean record and good credit score.

Another way to reduce the loan rate is taking loan against collateral. However, assessing the value of collateral is also a difficult task.

The ease of securing loans also differs from bank to NBFCs (non banking financial companies) to fintech players.

“It’s 2022. Everything from groceries to food, consumer durables to blood tests is home-delivered today. In that sense, isn’t going to a physical branch to get a loan becoming archaic?” asks Nitin Misra, Co-founder, indiagold.

Commenting on the grueling task of getting a loan sanctioned, Misra said, “While borrowing from banks/NBFCs, the customer first removes all the gold from their almirah, since they’re unsure of the exact quantity they need for a loan. Typically, most customers don’t borrow against all their gold in one go. Once they locate their nearest bank branch, there is always the risk of carrying unsecured collateral. At times, customers avoid walking into a nearby branch – instead travelling to a distant one to avoid being seen or followed.”

“Once the gold is handed over, branch officials assay and assess the principal and interest rate. If the valuation falls short or if the customer does not accept the offer, they must take their gold and again travel to another bank branch. Due to the inconvenience and privacy issues, they end up accepting the unfair offer in most cases. Subsequently, they share their bank account details and the money is transferred to their account,” he added.

Apart from the difficult processes, there are also some charges involved in the loan-sanction process.

“Now, depending on the lender, customers may also have to shell out processing charges. There is no facility to keep their gold in the lender’s locker without taking a loan (useful for businessmen). Hence, each time they need a loan, this cumbersome process is repeated. Needless to say, they have to visit the branch again to close the loan,” said Misra.

“On the other hand, borrowing from a FinTech means doorstep convenience, security and privacy. Customers also get the option to choose from multiple lenders in terms of schemes, i.e. differential rate of interest and loan amount. Additionally, loan documents and loan-related processes can be performed on smartphones without the need of visiting a branch. In a nutshell, FinTechs make products more affordable, convenient, usable, accessible and transparent – thereby thoroughly enhancing the consumer experience,” he added.

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