If you are planning to raise a personal loan from a lender, there are plenty of options to go around. One could reach out to a bank, an NBFC, or even a fintech app.
And in case you are in a dilemma whether you should raise a personal loan from a bank or from a fintech app, we have listed out a number of key differences that borrowers should be aware of.
Bank vs fintech app: These are the key differences
I. Processing Speed: Banks generally have a slower loan approval process. These may take a few days for manual verification and documentation. Fintech apps provide faster approval within minutes or hours, using automated systems and digital processes.
II. Cost and fees: Banks tend to charge higher fees, including processing fees, prepayment penalties, along maintenance charges. On the other hand, fintech apps provide lower or no fees.
III. Interest rates: Generally, banks provide personal loans at lower rates of interest, whereas fintechs charge high rates of interest on loans they provide.
IV. Accessibility: Banks generally work through physical branches (although customers transact through NetBanking as well). Fintech apps work online, making them more convenient and accessible across the country.
V. Loan amount and purpose: Banks provide larger loans, whereas fintech apps generally offer smaller, short-term, or micro-loans for immediate needs.
VI. Technology: Fintech apps generally use machine learning and data analytics to make quick credit assessments and give personalised offers. Banks also adopt similar technologies, but they could be restricted by traditional systems which dominate their digital infrastructure.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
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