Digital Personal Loan Vs Traditional Personal Loans: Pros and Cons

Digital personal loans can be availed online within minutes, making it convenient for individuals in urgent need of financial aid. You can skip the long queues and complex paperwork and avail your personal loan in a day.

Since the end-to-end loan procedure is executed online, your personal loan applications are approved and disbursed quickly, provided that all the documents are accurate and complete.

As you don’t have to physically visit lenders to find out their interest rates and processing fees, you can easily compare multiple vendors and their offers. This helps you make informed decisions that resonate with your financial situation.

Compared to traditional loans, digital loans require less documentation and digitally access your financial data. Online leaders carry out a digital verification, eliminating the need for extensive paperwork.

When you avail a digital personal loan, you have the option to choose interest-only EMIs and step-up EMIs, where your EMI payments gradually increase. This helps you plan your repayment strategy so you can become debt-free as quickly as possible.

Certain lenders have some hidden terms and conditions in their fine print which is often ignored by candidates. It’s recommended that you read the loan agreement carefully before signing it.

Many people opt for online personal loans in times of emergencies and there are some fraudulent lenders online who take advantage of this. Such lenders charge exorbitant processing fees and high interest rates on personal loans to trap vulnerable people. So avail a loan from lenders registered with the Reserve Bank of India (RBI).

Sharing your sensitive information and financial data online can lead to data breaches or identity theft. You must do your due diligence before choosing a lender.

There is no face-to-face interaction with loan officers, which is a con for people who require guidance or personal assistance when applying for a personal loan.

The concept of digital personal loans is still relatively new, hence, the regulatory environment for them is still evolving. The laws may differ from one jurisdiction to another, making it challenging for borrowers to get legal aid.

Established banks and NBFCs offer a higher loan amount up to ₹40 Lakhs, whereas digital personal loans offer only a maximum loan of ₹10 Lakhs.

Candidates with high credit scores can avail a personal loan with lower interest rates and can negotiate on the loan terms. This is because such candidates have proved their creditworthiness, which lowers the lender’s risk.

When you avail a personal loan from your bank, you have some sense of security due to a long-term relationship with the bank. And if anything goes wrong, you can visit the bank directly to sort out your issues.

When you opt for a traditional personal loan, you get personal assistance and guidance from the bank representatives. This is a big advantage for people who are availing a loan for the first time.

Since your personal loan application is manually reviewed, it may take days or weeks to get approval.

You need to fill out a bunch of forms when applying for a personal loan and provide hard copies of various documents whenever you visit the bank.

Unlike digital personal loans, banks have standard credit products that allow little to no customization.

Due to the high loan amount, banks require candidates to have good credit scores and proof of stable income to sanction a loan.