Imagine it’s the end of the month. Your wallet is empty and so is your bank account. You have to send Rs 40,000 to your brother for coaching expenses or any other immediate financial expense. You don’t have a credit card and your salary isn’t enough to get a loan from a bank. What can you do?
The answer lies in digital lending.
Apps like ‘Early Salary’, ‘Just Money’, are among a bevy of digital lending companies that will lend you any amount ranging from Rs 20,000 to Rs 2 lakh for a duration ranging from three months to an year.
These companies don’t ask for papers or documents. All they need is for you to upload your PAN card and Aadhaar details and the money is transferred in just 4 minutes. They don’t even check your credit score or ask for KYC details or bank statement.
Understanding the Three-One-Zero Model
These firms targets those who are freshers in market or due to low salary are unable obtain a credit card. Firms like ‘Early Salary’ provides loans to people with monthly salary as low as Rs 18,000 a month. These digital firms work on a Three-One-Zero model.
Which means after vetting you, the firm decides in just three minutes whether you are eligible for a loan or not. After that, the money is transferred in just one minute. Zero stands for zero as in no human touch because money is transferred directly to your account.
How Do These Firms Vet You?
The digital lending firms check your social media profile before approving the loan. They also monitor your friends on social media. They also track the bill payment history of mobile phone, your geo location history, your online shopping history etc.
So, for a digital lending firm, your social media activities and your online shopping history act as a KYC or a bank statement.
Short Term Loan With High Interest Rates
It is important to note that the digital lenders lend you money based on your consumption pattern and not the income. Hence, if you have acquired a loan through a digital lender, it’s advisable to pay it back as soon as possible.
The interest rate on these loans is often as high as 30%. But since these companies are regulated by RBI, SBI and IRDA so chances of fraud are minimal.