One of the leading financial technology companies in India, BharatPe, is now providing its merchant partners with secured credit options. The two-wheeler loan and the Loans Against Mutual Funds (LAMF) are the newest offerings from the financial technology company.
With this launch, BharatPe is expanding into secured lending for the first time, building on its recent success with unsecured loans.
Facilitating Easier Access to Capital for Businesses
The continued dedication of BharatPe to empowering merchants through innovative financial products was highlighted by Nalin Negi, the CEO of the company.
In 2018, BharatPe set out to provide millions of traditional retailers with cutting-edge financial technology solutions. “We have made tremendous strides in the past few years and have enabled our merchant partners to receive unsecured loans totalling over INR 15,000 crores,” Negi stated.
He said that the firm’s credit portfolio and relationships with merchants would be strengthened even more by the use of secured loans.
Connecting With OTO Capital, Volt Money
The new loan opportunities are made possible by BharatPe’s partnership with OTO Capital and Volt Money. Loans for two-wheelers would be made available to BharatPe businesses through OTO Capital, an online marketplace and lending platform. There are a variety of payback periods available, from 12 to 48 months, and the maximum loan amount is 2.5 lakh rupees. Users may rest assured that their experience will be smooth because the entire procedure is digital.
With Volt Money’s Loans Against Mutual Funds (LAMF) service, businesses can borrow up to one crore rupees.
The goal of the service is to make it simple for merchants to get the money they need to run their businesses.
Borrowers can rest easy knowing that OTO Capital and Volt Money will handle the loan distribution and repayment on BharatPe’s behalf.
According to Sumit Chhazed, the Chief Executive Officer of OTO Capital, “Our mission is to make ownership of two-wheelers accessible and affordable for every aspiring entrepreneur in India. Collaboratively, we are dedicated to delivering mobility solutions that are easily accessible and will contribute to the success of organisations.”
Bharat Lamba, the co-founder and chief business officer of Volt Money, made a similar statement: “We are uniquely positioned to meet the short-term liquidity and working capital needs of micro, small, and medium-sized enterprises (MSMEs) by providing instant loans against mutual funds.” This enabled and empowered MSMEs financially.
Expanding the Range of Products
BharatPe’s goal is to broaden its product offerings and generate new revenue sources, and the introduction of secured loans is a component of this larger strategy.
It is the intention of the company to introduce additional secured loan solutions in the future months in order to meet the requirements of a wider variety of merchants.
The company entered the gold loans market in 2022 for its merchants by forming partnerships with non-bank financial companies (NBFCs) and issuing loans of up to twenty lakh rupees against a gold commitment.
There are currently more than 13 million merchants who are a part of its base.
This article has been contributed by Manish Aggarwal, Founder & CEO, E-Revbay Private Limited.
In the rapidly evolving financial landscape, short-term loans have become a vital resource for individuals and small businesses to address immediate financial needs.
Short-term loans are essential for both personal use and small businesses in India. With an emerging middle class of over 400 million, short-term loans will play a pivotal role in personal finance.
A 2021 survey indicates that 90% of adults in India now have access to a financial or savings account, highlighting the vast distribution potential of short-term loans in Tier 2, 3, and 4 towns. Easy access to short-term capital will remain crucial to our economy’s growth.
Understanding Short-Term Loans?
Short-term loans are loans designed to provide quick funds to borrowers, typically with a repayment period of less than one year. These loans are characterized by the following:
Repayment Period: Less than eighteen months.
Loan Amount: Ranges from a few thousand to 10 lakh rupees.
Rate of Interest: Typically ranges from 11% to 24% per annum, based on the borrower’s credit profile.
Why Short-Term Loans?
Short-term loans typically fulfil an immediate need for funds, which could arise from:
Unforeseen Expenses: Providing quick funds for unplanned and unavoidable expenses.
Meeting Emergency Expenses: Typically used for funding medical emergencies or emergencies arising from unexpected damages.
Bridging Temporary Cash Flow Gaps: For both individuals and small businesses to maintain liquidity.
Financing Short-Term Business Needs: This may take the form of inventory purchases or working capital requirements.
Business Support: Enables small businesses to maintain operations during cash flow shortages or unexpected expenditures.
Credit Building: Timely repayments can help borrowers build or improve their credit scores.
Economic Impact: Contributes to overall economic stability by providing financial support during economic downturns or personal financial crises.
Inclusivity: Available through various channels, including traditional banks, NBFCs, and online platforms, making them accessible to many borrowers across urban and rural areas.
What Types of Short-Term Loans Are Available?
Understanding the different types of short-term loans can help borrowers make informed decisions about their financial requirements.
More popular short-term loan options include:
Payday Loans
Payday loans are designed for individuals who need quick cash and are waiting for their next paycheck. They are an advance on your salary, which you can use to cover immediate expenses. Your next payday must repay these loans.
Personal Loans
Personal loans are granted based on income, employment status, and credit history. They require minimal paperwork and are approved and disbursed quickly. Personal loans can be used for various purposes, such as urgent home repairs, medical emergencies, wedding expenses, travel, and shopping.
Loans Against Gold
Gold loans involve mortgaging your gold to secure the loan amount. To secure this loan, you are required to use your gold as collateral. These loans offer the flexibility to repay the principal amount at the end of the loan tenure.
Car Title Loans
If the car is owned outright by the borrower, they can use it as collateral to obtain a Car Title Loan. These loans typically let you borrow 25 to 50 percent of the car’s market value and often come with high APRs and short repayment periods. Delayed payments can increase interest charges, making the loan more expensive.
Bank Overdrafts
Bank overdrafts provide temporary coverage when your account lacks sufficient funds. Although this option comes with high interest rates, it serves as a short-term solution to cover immediate expenses. Similarly, instalment loans involve regular, frequent payments over time until the principal and interest are fully repaid.
Lines of Credit
Unsecured and secured personal lines of credit allow access to funds on an as-needed basis. Borrowers can withdraw up to a preset credit limit, which replenishes as payments are made. Interest is only charged on the amount borrowed. Once the draw period ends, the remaining balance is converted to an installment loan with a set repayment period.
Online or Installment Loans
Short-term loans can also be obtained entirely online. The entire process is digital, from application to approval, and funds are often wired to the borrower’s bank account within minutes of approval.
Invoice Financing
Popular among small businesses, true to its name, businesses can use their accounts receivables (unpaid invoices) as collateral to obtain a loan. The lender advances money based on the value of the outstanding invoices and charges interest for the duration that the invoices remain unpaid. Once an invoice is paid, the lender deducts the interest charges and returns the remaining balance to the borrower.
Short-term loans come in various forms, each designed to meet different financial needs. Understanding these options and choosing the best solution for your immediate monetary requirements can be challenging.
Given the number of options available today and the presence of numerous financial advisors, borrowers may feel unsure if they are getting the best deal; this is where fintech comes to the rescue; tools are now available to help even the most uninitiated understand their options. For those who are well-versed, these tools make the evaluation quick and error-free. Let us look at some of the tools in the market that help customers find the easiest ways to raise funds for short-term or long-term needs and are gaining traction:
Car Par Loan (CPL): Enables customers to apply for auto loans for new or used cars. CPL calculates the car’s current value and determines the eligible loan amount in just 10 seconds.
My Loan Bhai (MLB): An algorithm-based virtual loan agent that automatically decodes a customer’s credit profile to recommend best-match, high viability for approval personal loans, home loans, loan balance transfer, loan consolidation, and other funding solutions.
Once you have determined the best loan option for you, let’s examine how to get it.
How Can One Obtain a Short-Term Loan?
The process of obtaining a short-term loan involves several steps:
Application
Fill out application forms.
Provide necessary documentation (ID, proof of income, etc.).
Apply.
Approval
Undergo a credit check and information verification.
Receive approval decision.
Disbursement
The loan amount is disbursed to the borrower’s account.
Typically, it occurs within a few days of approval.
Required Documents
To apply for a short-term loan, borrowers need to provide various documents, including:
Personal Identification: Aadhar card, PAN card, Passport.
Proof of Income: Salary slips, 3-6 month Bank Statements, Income Tax Returns.
Additional Documents: As required by the lender’s policies, such as employment verification or business registration documents.
How to Apply for a Short-Term Loan
Borrowers can apply for short-term loans through multiple channels:
Online or App-Based Application
Apply through lender websites or apps.
Fill out the form and upload it along with the required documents.
Apply online.
In-Person Application
Visit bank branches or lending institutions.
Fill out physical forms and provide the necessary documentation.
Apply in person.
Through Financial Advisors/Agents
Consult with financial advisors or brokers.
Receive assistance in finding suitable loan options.
The advisor applies on your behalf.
Eligibility Criteria
The eligibility criteria for short-term loans typically include:
Age: Minimum age of 21 years; maximum age varies between 60-65 years.
Income: Minimum monthly income ranges from ₹15,000 to ₹25,000, depending on the lender and loan amount.
Credit Score: A good credit score, typically 650 or above, affects eligibility and interest rates.
Employment Status: Stable employment with a minimum of 6 months to 1 year at the current job. Self-employed individuals must have a reliable source of income.0
Conclusion
Short-term loans are indispensable tools that provide quick financial relief to individuals and businesses alike. They support economic flexibility, help maintain business operations, and contribute to credit building and economic stability.
With the convenience of multiple application channels and tailored products like CPL and MLB, short-term loans are more decipherable and accessible than ever.
Whether for immediate personal needs or business support, short-term loans offer a valuable financial solution that can help bridge gaps and address urgent expenses.
Buy Now Pay Later – It’s convenient, accessible, and consumer-friendly. But, is there more to it?
India’s BNPL market is estimated at around $3 billion as we write this, but, it is about to explode if data science is to be believed. The predictions hint that it will be among the top 10 fastest growing market sizes in India, and in just 4 years, it would be at $45 billion!
For an industry that big, regulation has to be fail-proof.
In a recent directive, the Reserve Bank of India (RBI) has made it clear it doesn’t trust these BNPL companies. RBI has decided to look deeper into their business models and how they extend credit lines via Prepaid Payment Instruments (PPI) to their customers, when there is a clear lack of…almost everything: Transparency, Administration, Licenses, and above all, A SYSTEM!
To be clear, RBI hasn’t come down cold on just BNPL, it is looking at non-bank fintech lenders and even smaller banks that use PPI to load their wallets or extend credit lines.
But, wait, let’s take the story right from the start. Too many questions, right!
What is BNPL? What is PPI? Why is the RBI up on its case? What does it look like for users?
What Is BNPL?
To begin with, the idea of buying now and paying later isn’t so new. You may be surprised to know it all began in the late 19th century when businesses around Europe started extending loans to industrialists. These loans were material-based. Industrialists had the option to buy goods and pay for them later. Of course, in this model, they had an interest rate.
In the early 21stcentury, fintech providers made “Buy Now Pay Later” a digital facility.
In the way BNPL goes around now, there is a no-interest period today. Buy Now Pay Later is a scheme where a consumer, such as yourself, can purchase an item without paying for it instantly.
Though you will be required to pay back, it gets easier for those who don’t have cash. Instead, you get to divide the cost of the goods in the form of an easy installment or zero-interest loan.
The payments can be made within 90 days, unlike conventional loans that go on for years. Now, if you settle the payment within the pre-decided time frame, you pay no interest. But, if you cross it, yeah, there is going to be a penalty on the overdue.
This is the basic working of the BNPL utility.
BNPL has made quite a mark. 60% of people making purchases online have used BNPL services. Major players in India include Jupiter, Ola Pay, Postpe, ZestMoney, LazyPay, and Simpl.
Their data show that most of their users are 18-25 years old. The millennial generation made up to 20% of the BNPL users. In 2021, ZestMoney published a report saying that their millennial users increased by 2x, and their GenZ customer base grew by 3x during the pandemic alone.
What Is So Tricky About BNPL?
Debt
Even though BNPL is marketed insidiously as a convenient paying option or a way of life, BNPL is still a debt. When you opt for BNPL, most financial institutions open a loan account in your name. This loan account is added to your credit history.
Credit score
Once a loan account in your name is opened, this small debt is added to your credit score. If you default on a single payment, it will go into your credit history. This could affect your credit score and loan-taking ability too.
Regular shopping via BNPL is a ticking bomb
The BNPL scheme was introduced to capture a market of 300 million households in India, which did not have the credit score to afford things.
Tier 1 and 2 cities saw more men spending on fashion and lifestyle while women used BNPL for upgrading their electronics and education. During festive seasons, BNPL services were used 10x more for purchasing smartphones, electronics and fashion.
Transactions through BNPL services increased by 200% during festive seasons on apps like Amazon, Myntra and Flipkart. Surprisingly people also paid for their travel costs through BNPL services.
How Customers in Different Cities Spent Using BNPL
When almost everything is purchased with an option to pay later, we run into a liquidity freeze. We also run into more chances of late payments and bad credit scores.
High-interest rates
If you default in payment of this loan, apart from your credit score getting affected, you will be liable to pay interest of about 30% to 45% per annum.
Spend more
The Buy Now Pay Later scheme makes you purchase more items by spreading the installments out conveniently over months. Even though these installments are easy to pay, you still pay a higher extra cost. An alarming 59% of BNPL users admitted that they spent more by using the services.
Young users
Most of these BNPL companies have young users with no credit score. No one in the credit market will give them a loan; therefore, BNPL is the only way to purchase what they want.
What makes this worse is that most of these BNPL users do not have a job to pay off these loans. They are likely to default or go under major financial stress. This is reflected in the 5% default rate of payment for ZestMoney, a top BNPL market player in India.
Inflation
No one realises that a BNPL utility might as well have a floating interest rate with it. A fixed interest rate doesn’t change for the tenure, irrespective of RBI’s repo rate. However, floating rates do. An increase in inflation will increase the interest rates. This could impact the loan bearers negatively.
Lack of transparency
Most firms are opaque in their loose regulations to get more customers. For instance, take the interest rate: is it floating? Is it fixed? In fact, take the recent RBI directive. No BNPL issuing lender has officially declared the ongoing probations and how they plan on complying. It is estimated that these new rules will impact 8 million users in India, who are yet to hear a plan to course-correct this.
How Often Customers Used BNPL Services in 2021
What is PPI?
Prepaid Payment Instruments are essentially cards, wallets, or any other avenue where you could store your money, and later use it for shopping, remittance, and even investments.
Now, the problem with using credit lines to load your PPI is that the customer doesn’t really have that money.
But, they can spend it! they can also default payments that he/she has to make to the credit provider. This creates a gap. Hence, the RBI directive.
So, is this a bubble waiting to burst?
Conclusion
Well, history would point out that BNPL has been a mess in the past as well.
A tragic example of the BNPL scheme was the 2002-2008 market crash in America. Many people were offered house loans at a 0% interest rate during these years. The policy-writing and interest regulations were dodgy, and the result was that borrowers defaulted and ended up without houses but with loans to retire.
The RBI tightening its fists against loose financers is a step in the right direction if it meets execution without much ado.
FAQs
Is BNPL available in India?
Yes, the BNPL model is available in India and has gained massive popularity since it was introduced in India. many consumers are purchasing smartphones, electronics and fashion products.
What are the risks of BNPL?
High-interest rates, lack of transparency, overspending, and huge debts are some of the risks related to BNPL.
Why is Buy Now Pay Later so popular?
Consumers prefer BNPL as they can buy their favourite products without worrying about paying the money upfront.
This pandemic was hard for everyone one of us and we all struggled to oversee discretionary spending due to unanticipated expenditures. Many people also saw a dip in their savings to fulfill the family’s requirements. So to mitigate the increased financial stress some people turned towards personal loans but how do you know if you are eligible for a personal loan or not and what variables affect her personal loan eligibility.
Here’s what you need to learn about the 5 most important factors that may influence your personal loan eligibility.
Before that let me give you the specifics of the personal loan. So, let’s dive right in!
A personal loan is a form of installment loan that provides you with a set chunk of money, typically ranging from $1,000 to $50,000, in one single payment. They are typically unsecured, which means you need not provide assets to protect funds. The repayment period can differ considerably from one year to a decade. They are used for just about anything, though some financiers may limit their use.
Making an application for a personal loan is akin to making an application for a credit card. You will be asked to input your info, financial data, and loan info. The creditor will conduct a solid credit analysis before authorizing you, which may momentarily lessen your credit rating.
If the creditor is satisfied with your fiscal predicament and creditworthiness — typically, a rating in the mid-600s is required — the creditor will ascertain your interest rate, loan balance, and provisions.
However, these days there are platforms like Zest Money that have simplified getting personal loans much easier. With Zest Money you can get a personal loan even if you do not have a credit score. Simply download the Zest app, complete the KYC, and get a credit limit that you can use to shop in over 100,000 offline and 15,000 online stores. The best part is that the Credit Limit is available at 0% interestwhen paid on time. Once you sign up for a Zest Money Credit Limit, you also become eligible for Zest Money Personal Loans that too without uploading any additional documents. Besides, you can choose your EMI plan, and repayment term, and even foreclose the loan without paying any foreclosure charges.
The most vital eligibility criterion when applying is that you are within the bank’s age cohort. Age is an important factor as it tells lending institutions about your capital adequacy and earning power. If you’ve graduated college and are in your 20s, you may lack basic monetary stability. Likewise, if you’re over the age of 60 or are retiring early, your earning power will be reduced during this time.
Candidates between the ages of 25 and 55 are usually considered by banking firms. The age thing varies from bank to bank.
Monthly earnings
Monthly Earnings
Your potential to repay debt is directly proportional to your earnings. Your revenue is a critical component of your fiscal portfolio. The baseline salary requisite, on the other hand, varies by lender. Your lending institution takes into account the city you reside in as well as the corporation you work for when assessing your earnings.
Although the main income stream is taken into account by the lending institution, having extra revenue from passive channels such as subletting out your home or rental estate can be advantageous. Having a supplementary stream of revenue can help lending institutions feel more confident that you will compensate your EMIs on time.
Credit record
Personal loans are types of unsecured debt. They don’t have any assets or security backing them up. As a result, lending institutions use credit metrics to evaluate your ability to repay.
Your credit record reveals your EMI transaction regularities in the past. As a result, you must pay your EMIs on time to avoid falling behind on your loan payments. This will have a massive influence on the elements that influence personal loan acceptance.
Debt to income ratio
Assume you work for a reputable firm and are paid well, but the majority of your earnings are going toward EMI payouts. This factor influences your personal loan qualifications. The lending institution calculates your debt-to-income ratio by splitting your total earnings by the total amount of your current debt.
If your debt-to-income rate has risen, your lending institution may deny your loan request or cost you a higher rate of interest on your personal loan. Generally, it is best to keep the debt-to-income ratio below 50%. A higher proportion of this component increases the danger of nonpayment.
Stable employment
Employment
When approving a personal loan, your lending institution considers your total professional experience as well as your present employment status. If you work for a well-known company and have a consistent stream of revenue, your lending institution deems you a lienholder with stable employment.
If your manager has a background of late compensation or is not economically solvent, the lending institution may deny your request. This is attributed to the reason that these variables influence the potential to reimburse your personal loan.
Pros and Cons of Personal Loans
Pros of Personal Loans:
Personal loans can be used for a variety of purposes. They are used for a bunch of uses, including travel costs, medical bills, buying new accessories, gadgets, and even home/car upgrades.
Personal loans are available very quickly. In certain instances, the loan can be obtained within 24hrs. So, if you need emergency money, personal loans are your safest choice.
When contrasted to a mortgage payment or a car loan, personal loans usually do not necessitate as much paperwork. As a result, the handling time is reduced.
No need for security to acquire this loan, and the credit period is much smaller than that of a home loan or a car loan. In comparison to other loans, this carries less peril for the applicant because if you seem unable to pay back, your security is voided. Your assets are secure because personal loans do not require any security. This helps make this type of loan appealing to anyone who does not own any assets such as a car, a home, or stocks.
Cons of Personal Loans:
Lenders consider these to be risky since they do not require any security. These loans have extremely high-interest rates to compensate for their dangers.
Most financiers do not accept loan payments in installments. This implies you will have to repay the lender for the period of the loan. Because your first installments are used to pay interest, it can be very costly.
Because these loans are very risky, most bank requires their borrowers to have a good credit score. As a result, if your credit score is low as a result of past loan defaults, your request will be denied. As a result, the accessibility of this loan is subject to rigorous qualifying criteria based on creditworthiness.
Even banks that provide loans to debtors with poor credit end up providing reduced principal amounts and rising interest rates than those provided to debtors with good credit. These debtors are also subjected to stricter repayments.
Is Personal Loan the Right Choice for You?
If you need money quickly, personal loans are an appealing choice. Here’s how to tell if a personal loan fits one’s scenario:
You require the finances as soon as possible. Many lending institutions, particularly those that function online, can make capital available in a couple of times.
You have an excellent credit rating. Borrowers with stellar credit are eligible for the lowest rate.
You want to get rid of your massive debt. Personal loans are an excellent tool to manage and pay off high-interest credit card debt.
You will put the money toward important purchases. Personal loans can also be used to pay for large costs or to renovate your home.
Personal loans, on the other hand, are not suitable for all. They are, after all, still a debt obligation. Here are a few explanations why it may not always be the safest alternative for you:
You have a bad habit of spending too much money. Paying off your debt with a personal loan may not seem like a sensible approach if you intend to simply start accruing fresh credit card debts.
You are unable to make substantial repayments. Consider a personal loan’s repayment schedule and monthly bills. Use a personal loan calc to discern whether you can finance the monthly payments over the financing tenure.
You don’t need the cash immediately. Saving for a big settlement may make better sense than taking out a personal loan and making interest-only reimbursements for many decades.
These are the variables that portray your creditworthiness when applying for a personal loan. Lending institutions mostly take this into account when determining your qualifications for a personal loan and the rate of interest. As a result, it is advisable to confirm the prerequisites of your ideal lending institution beforehand to obtain a reasonably priced personal loan interest rate. Also, do check the pros and cons before you decide to apply for a personal loan.
FAQs
What are the eligibility criteria for a personal loan?
Sufficient monthly earnings, good credit records, and stable employment are some of the eligibility criteria for a personal loan.
What is the minimum salary required for a personal loan?
Most banks set a minimum salary limit of Rs. 15,000 – Rs. 20,000 per month for a personal loan.
When you start a business, apart from ideas, funds and a proper plan, you need people to work on that plan and execute it in a perfect way and those people are your employees, they are the driving force of an organization. Your employees are your assets, they are the ones who can make or break your company because a company is as good as its employees.
An employee’s efficiency can be found in the productivity of your business, they serve the customers along with you. Therefore, if you want to keep your business alive, you also need to take care of your employees, not only through monetary terms but from all around. Your internal public is as valuable as your external public.
Recently, Better.Com has fired 3000 employees, without any prior notice. In this article, we will talk about the reason for firing so many employees and what did the company do wrong. So without any further ado, let’s get right into the business.
“Employees are the key to your success with customers. Treat them well!” — Ron Kaufman
Better.com is an American company that provides mortgage lending and financing-related services through its online platform. The company was founded in the year 2014 by Vishal Garg and started its first business, Better Mortgage in 2016.
Vishal Garg, Founder and CEO of Better.com
The company is the direct lender of conventional loans, jumbo loans, fixed-rate mortgages, adjustable-rate mortgages and refinancing loans. The online mortgage company is backed by Softbank.
One of the attractive features of the company is that it does not take loan origination fees while providing loans. The headquarters of the company is situated in New York, United States of America.
Fired 900 Employees Over Zoom Call
Things took a wrong turn when, the digital mortgage company in 2021, on the month of December fired 900 employees over a Zoom Call. In a simple Zoom call, CEO Vishal Garg of the company announced that 900 of the employees, who were part of the Zoom call, are fired from their job.
The sudden terminations of those employees were met with a negative response around the world. The reasons for the termination were the lack of productivity and efficiency of the employees.
The Backlash From the Public
The sudden move by the company and its CEO received severe backlash from the world, as no prior notice was provided to them before their termination and created a negative impression of the company in the business industry.
The move was done after the company received a $750 million cash infusion. Following this incident, the CEO of the company, Vishal Garg stepped down from his position and took a break after being criticized by the public for this step.
After Garg’s break, he returned to his prior position. The situation grabbed the headlines and the action was criticised by general people for being extremely insensitive.
As mentioned above, before firing the 900 employees, Better.com has done a similar deed last year as well. After just a couple of months later, on March 8, Better.com again has sacked 3000 of its employees from their position in the United States of America and India.
The employees received their cheques in the payroll app and the way they got sacked was not at all in a good way as most of their computers got shut down in the middle of their work.
Amanda Bullard, Better.com
Reasons for the Lay Off
The first reason for the termination of the employees is the rise of interest value which has led to a drop in the origination value. The company let 35% of its workforce go. The company again said that efficiency is quite a big concern, so they are also laying employees off for that reason.
Where did Better.com Go Wrong?
The first fault is the lack of communication. Any kind of business need communication, lack of it will lead to problems only. Better.com has done the same thing twice, without having proper communication with their employees, the company is firing them. The employees were not given notice of their termination. This has created a negative impression of the company around the world.
Employees shared their experiences on different social media platforms, which has again created a stir. Bad word of mouth has been spread regarding the company, which somehow is affecting the company’s reputation.
As mentioned before the company is as good as its employees and the employer has every right to fire those who are not efficient enough and are not able to provide productivity. However, firing the employees must be done in such a way that it will not crush them entirely, proper communication is necessary while doing that.
FAQs
Why is Better.com laying off employees?
Better.com laid off employees citing the reason efficiency is a big concern for the company.
Who founded Better.com?
Better.com was founded by Vishal Garg in 2014.
When was Better.com founded?
Better.com was founded in the year 2014 by Vishal Garg.
In the last 7 to 8 years, the fintech industry has experienced immense growth all over. A countless number of fintech startups have begun their journey in the last few years and have already put their name on the list of top fintech companies.
As of 2020, the global market size value of the fintech industry is $110.57 billion. Fintech or financial technology is a form of technology that is challenging the traditional method of providing financial services to people.
Now in the fintech industry, there is a thing called credit score, and everyone is dependent on them, including consumers, business ventures, and purchasers. In this article, we will learn how credit scores play an important role in the fintech industry. So without any further, let’s get into the business.
“The major winners will be financial services companies that embrace technology.” – Alexander Peh
In simple terms, a credit score is a number that decides your creditworthiness. The number is between 300 to 850. The more your number is the more is your creditworthiness. This score actually depicts your chances to pay off the money that you owe to the lender.
This helps any kind of financial institution to understand if you are dependable enough to pay the loan if they lend you. If your credit score is high, then the chance of getting a loan and credit increases for you, if you want to buy something. If the score is lower then, the chances of getting a loan decrease.
There are different credit bureaus that check your credit scores and make a report on it and send it to you. The reports are based on many factors. There are three top and popular bureaus that count the credit scores of people.
There are there main international credit score bureaus that assess people’s credit score and they are:
Equifax
Experian
Transunion
Fintech Industry in India
The fintech industry in India has taken a huge turn in a few years, it has changed the way we used to enjoy financial services in the past. Currently, it wouldn’t be wrong to say that India is the hotspot for fintech startups.
As of 2021, the market size is $31 billion and it is said to be the third-largest in the world. By the next five years, we are going to see 22% growth annually. The country has 1860 startups in the fintech industry, out of those 17 have already got the Unicorn status. In the last two years, massive numbers of people have adapted to digital payments systems for any kind of transaction, and it’s only going to increase.
Role of Credit Scores in Fintech
The first thing the financial institution will do after getting your, request for the loan, is to check your credit history. If your credit score is good enough, then it will provide you with the loan and apart from that, loads of rewards and benefits. It is very good support for the fintech companies who are lending money to the borrowers.
How Credit Score is Calculated?
The way of calculating credit scores varies from bureaus to bureaus. They have their own model that they use to get the result. There are five things that are taken into consideration during the evaluation process and they are:
The credit scores help you in two ways and they are:
Your credit score lets you know where you are lacking, the complete report gives you an idea of how you can improve in that area to increase your score. The report consists of all the transactions that you have made.
Through a good credit score, you are eligible to get attractive offers on loans and credit cards. A credit score of 750 and above is the best to get good offers.
How to Improve Credit Score?
Pay your debt before the due date every month.
Don’t ignore your overdue bills pay them as soon as possible.
Keep in mind the credit card you use and its type.
Don’t spend too much on your credit card. Be aware of your spending and try to cut the unwanted ones.
Benefits of High Credit Score
A high Credit score has several advantages, some of which are listed below.
When your credit score is higher, you are eligible in front of banks to get loans and credit cards at considerably lower interest rates. Plus there is a chance of a discount on the processing fee of a high loan amount.
Those who have higher credit scores have a lower risk rate of not paying their debts. It basically means the chances of your loans getting approved are higher.
You are eligible for a credit card that offers good rewards and other offers like cashback as well.
Your credit limit increases, if you’re worthy, then the creditors know that you will pay your debt on time, this increases their trust which in return increases the credit limit.
Attractive Car insurance and home insurance rates are offered to those with good credit scores.’
Less number of documents is needed by lenders from you.
Guarantors are not needed when you are taking a loan if you have a good credit score.
Getting loans or credits can be quite a hassle but if you have a good credit score, then lenders won’t hesitate to lend you the money. Fintechs take the help of credit scores and realize who to lend money and who do not. The credit scores assure the fintech, about your credit risk and the money that they are about to lend,
FAQ
Why do financial institutions look at your credit scores?
Financial institutions take the help of credit scores to determine what kind of borrower you will be and if you are creditworthy or not.
Who uses credit scores?
Credit scores are used by financial service givers, especially lenders.
What is a good credit score?
A credit score of 700 or above is a good one as achieving the perfect 850 is quite hard.
What are the factors that affect credit score?
Payment history, Amount owed, Credit history length, Credit mix, and New credit are the factors that affect credit score.
Over the most recent few years, the microfinance area has seen promising development on the rear of the quickly developing Indian economy. The area has been instrumental in offering formal credit to underserved low-pay families and miniature, little also, medium endeavors (MSMEs), consequently expanding the commitment of these fragments to India’s general GDP.
In FY19, the microfinance area showed 40% development as far as advance portfolio. With progressions in innovation, advancement of administrative approaches, new associations and dispatch of different items, the area is required to keep up the current level of development soon. Let’s look at what exactly is a microloan and the Indian companies providing microloans.
Microloans also known as Microlending are short term loans that are generally smaller in amount. The micro loans can be availed by Self-employed, startups, micro entrepreneurs, small businesses and individuals who have a low capital requirement.
It is a type of small finance which is provided to low-income group or entrepreneurs who have very limited access or no access to lending institutions.
The RBI with the help of the Government of India has partnered with private limited companies and Micro Finance companies in order to provide micro loans to unbanked and underbanked people to provide them with loans.
The major purpose of microloans is for various business-related activities, meeting working capital requirements, starting a new business, maintaining cash flow, paying salaries to staff, managing day to day expenses, debt consolidation, etc.
Average Loan amount Borrowed in India as per the Age Group
Companies providing Microfinance loans in India
Bandhan Bank
Bandhan Bank provides microloans of a minimum of INR 1000 to a maximum amount of INR 25,000. The interest rate charged by the bank is 17.95 % onwards as of 2021 and there is no processing fee charged by the bank. The repayment tenure of the microloan is up to 12 months and the bank provides a doorstep delivery of the loan.
BSS Microfinance
BSS Microfinance provides microloans for a minimum amount of INR 12,000 to a maximum amount of INR 50,000. The interest rate charged by the company is 25 % onwards as of 2021 and a 1% processing fee is charged with the loan amount of above INR 25,000. There is no collateral required for availing of the loan.
Annapurna Microfinance
Annapurna Microfinance provides microloans for a minimum amount of INR 10,000 to a maximum amount of INR 80,000. The interest rate charged by the company is 21.90 % onwards as of 2021 and a 1% processing fee + GST is charged with the loan amount that is borrowed. The repayment can be done monthly, weekly or fortnightly according to the preference of the borrower.
SKS Microfinance
SKS Microfinance provides microloans for a minimum amount of INR 7,591 and a maximum amount of INR 11, 610 for the first time and for the next time onwards depending on the credit score the company provides an increased set of INR 14, 959. The interest rate charged by the company is around 23.55% onwards as of 2021 and a 1% processing fee is charged on the loan amount.
Equitas Small Finance Bank
The Equitas Small Finance Bank provides microloans for a minimum amount of INR 2000 to a maximum amount of INR 35,000. The interest rate that is charged by the bank is 23 % onwards for the year 2021 and a processing fee of up to 1% on the loan amount is charged. The loan is provided only to Low-income groups and economically weaker section categories.
Ujjivan Small Finance Bank
Ujjivan Small Finance Bank provides microloans for a minimum amount of INR 2000 to a maximum amount of INR 60,000. The interest rate that is charged by the bank is 22 % onwards for the year 2021 and a processing fee of 1.2 % of the loan amount is charged for the loans above INR 25,000. The repayment tenure for the loans varies from 6 months, 1 year, 1.5 years and 2 years.
ESAF Microfinance and Investments P Ltd
ESAF provides microloans for a minimum amount of INR 1,000 to a maximum amount of INR 1 lakh. The interest rate charged by the company varies between 22 % to 26 % p.a based on diminishing charges and also a processing fee is charged with around 1 % to 2 % of the loan amount + GST. The tenure for repayment of the loan is around 3 months to 60 months.
Fusion Microfinance
Fusion Microfinance provides microloans for a minimum of INR 3000 to a maximum amount of INR 60,000. The interest rate charged by the company varies between 21 % to 21.50 % p.a based on the reducing balance method and a processing fee of 0 to 1% + GST is charged. The repayment tenure of the loan amount varies from 8 months to 2 years.
Arohan Finance Services Limited
Arohan Finance Services provides microloans for a minimum of INR 1,100 to a maximum amount of INR 50,000. The interest rate charged by the company is between 20.70 % to 21.25 % p.a. The repayment tenure of the loan amount varies from 3 months to 24 months.
Casphor Micro Credit
Casphor generally provides micro loans for activities such as the construction of toilets, women empowerment, and procurement of gas connections. They provide loans for improving the health and social status of the beneficiaries.
The micro loans provided by the company would be for a minimum of INR 2000 to a maximum amount of INR 14,000. The interest rate charged would be around 23.94 % to 24.53 % and also a processing fee of 1 % on the loan amount if charged by the company. The repayment tenure varies from 52 weeks, fortnights or months.
Asirvad Microfinance Limited
Asirvad Microfinance provides micro loans for a minimum amount of INR 2,498 to a maximum amount of INR 45,000. The interest rate charged by the company is around 21.70 % p.a. and the loan repayment tenure varies between 12 months to 24 months.
Conclusion
The objectives of microloans are to promote the socio-economic development among the low income group, to reinforce self help groups and develop the economy of the country and also to support and promote women entrepreneurship and startups across the country.
FAQ
What are microloans used for?
Microloans are used by Startups or Entrepreneurs who may have trouble getting financing from other sources, such as banks.
What is micro loan?
Microloans are loans that are provided to small business owners and entrepreneurs who may have trouble getting financing from other sources, such as banks.
Who is eligible for micro loan?
To be eligible for micro loans You must be between 25 years and 65 years of age, Your business should have a vintage of at least 3 years and You should have filed income tax returns for your business for at least one year.
Anagha S
