There are invariable relations between finance and all the systems because it is difficult to move a single step without financial involvement. The fundamental requirements of human beings can be solved through financial support only. There are various situations where you have some urgent financial need and cannot solve it due to insufficient funds. A loan is helpful to solve your problem for that time; it’s a temporary solution but necessary for that crucial period. There is a various lending platform that provides instant loan for the long term and short-term. All the banks and NBFCs are included in digital lending.
With the emergence of digitalization and technology, digital lending services are growing exponentially because it has become easy for a loan application, documentation, verification, approval, disbursement, and repayments. The complete mechanism became helpful for borrowers and lenders, but still, there are many challenges for customers and lenders.
We are sharing some challenges. These are as follows.
Awareness regarding the loan
The customers must know about the benefits of a loan and its terms and condition. It may be easy to borrow a loan from any bank or NBFC, but you must know that a personal or short-term loan is helpful to manage the cash for some particular period only; it is not the way to solve your financial problem permanently. You must remember that as per the rate of interest and tenure, you have to repay the loan amount to maintain your financial reputation. Often, a borrower becomes late in repayments or does not understand its rules. It may be due to the lack of awareness.
In these cases, the lenders have to face some problems in recovery, like refusal of repayment, expanses of extra time, etc. It may be possible with a keen and explicit convincing power by the lenders or their relationship executive.
Identification of customers
The identification or knowing the customer is essential to the lenders. Digital lending is beneficial for submitting applications or documents like bank statements, salary slips, supportive documents, etc. But the banks are still following their way of knowing the customers. There is the provision of physical verification, and the approval is only done after the satisfactory proof. These are some challenges because the lenders can have the idea of transactional details, CIBIL reports, salary, etc. But they cannot be sure about customers’ intentions or moral values. The brief details can be grasped by some analytic power only. The lenders can only predict the chances of recovery, but their guess will be valid only after a successful recovery.
Increase in interest rate
A few days ago, the interest rate by the banks was increased to develop and maintain the national economy. But the rate of interest on loans was affected due to the rate increase. Now the customers are worried about the extra burden. Inflation directly influences the loan, and it becomes a challenge in itself.
Directly proportional to the literacy rate
The digital lending process makes a loan application easy for all, but there are some challenges due to the lower literacy rate. There are a large number of people do not use any digital platform. Even for withdrawing the cash, they are dependent on the manual process. So, it is a big challenge for the banking or digital lender to expand their business, or the banks must use human support for the entire process. Therefore, it’s a big challenge for the loan services. The lending process will be enriched with the increase in literacy.
To improve and enrich the process of a loan and its maximum success ratio, it is necessary to make people aware of its benefits and the repayment condition so that one can get it quickly with a good credit score and salary. The lenders must select the customer with no chance of delinquency, which is only possible with a perfect verification or a convincing power. Anyone having a good idea about the consequences of a low CIBIL score will not make mistakes in repayments. And it may be possible by convincing people regarding the default and its effects.