The digital loan lending market is on the rise now, which has made access to credit very easy since many people can now access loans quickly. The personal loan apps have greatly contributed to the introduction of these loans, and any person can avail the loan at anytime and anywhere. Getting a personal loan can be useful because it will assist you in covering different costs. What’s more, a personal loan is not tied to a particular purpose. You can use the money from the loan to pay for anything.

Whether it is going on your dream holiday, paying hospital bills, consolidating debts, or more, a personal loan can be a great way to make that happen. Even though getting a personal loan has good points, it also has some bad points. Read this guide till the end to learn the pros and cons of digital personal loans.

Pros of Digital Personal Loans

Getting a loan is a surefire way to bridge your financial gap and meet your short-term goals with ease. As such, the advantages of personal loans shouldn’t be overlooked.

Here are some of the advantages:

  1. Fast and Convenient

When it comes to speed or convenience, digital personal loans are at the forefront. The lenders have offered a smooth application procedure to quickly apply for the funds you need as long as you understand how to go about it. You will have to upload some of your documents to act as proof of income, identity, and proof of your address online.

Besides, most lenders have a quick funding process, and the time you have to wait for the funds depends on the lender. Most lenders take one day to 2 weeks to disburse funds to the borrowers. However, it is best to check with your lender to know how long you’ll have to wait.

  1. No Collateral Required

Loan applications at banks will need you to give a security for the loan. This whole process will complicate the tedious procedure, thus making it challenging for borrowers to get credit. On the other hand, digital personal loans don’t need securities, which makes the process of getting the loan simpler and faster.

  1. Minimal Documentation

Digital personal loans are processed online, which means there is no physical paperwork required. They’re convenient, flexible, and fast, and only require a few basic documents to verify your income, address, identity, etc.

Some of the documents you have to provide during the application include:

Proof of Identity: Aadhar, PAN

Proof of Income: Bank Statement, Payslip

Proof of Address: Utility Bill, Credit Card. Rent Agreement. Loan Statement

  1. Paperless Transactions

Online lenders do not need physical documents since the whole process is completed online on digital platforms. This will save you time and resources. Besides, they reduce the chances of errors, identity theft, and fraud.

These transactions are possible through digital lending platforms, which partner with NBFCs and banks to provide loans to borrowers via apps and websites. The process of applying for the loan is easier and faster.

  1. Builds Credit Score

One of the most common ways to improve a credit score is through a personal loan. However, this will be achievable if you repay your digital loan on time. You can use the loan to repay the credit card debt, which will help reduce the credit utilization ratio. A low ratio will boost your score. Adding a loan to your credit will diversify the credit mix and help show you can handle the different types of debt responsibly.

  1. Easy to Compare Interest Rates

With personal loans, the lender allows borrowers to compare interest rates from their sites by checking the basic information without the credit score. This implies that you can easily look around with the best private lenders to check their interests and the loan amounts offered by every lender.

  1. Instant Access to Funds

The major reason why people opt for digital personal loans is to get access to capital. You can quickly access cash to cater to your business or an emergency. Instead of looking for your friends who will help you, you can opt for a personal loan.

Cons of Digital Personal Loans

Some of the common disadvantages of getting loans are as follows:

  1. Higher Rates

Some of the digital lending platforms will impose a higher interest rate than the traditional financial institutions especially for those with lower credit scores. Borrowing money isn’t free but at a cost which is the interest rate you pay to the lender over the agreed period. Personal loans may come at higher rates because they don’t necessarily require collateral.

  1. Depends on Technology

Digital lenders largely depend on the internet connection and technology which poses a major challenge for the individuals residing in areas with restricted internet connection. Conversely, you require a stable internet connection to apply for a loan online. Aside from that, you also need a phone or a computer to access the lender’s website.

  1. May Include Hidden Fees

Even though digital personal loans may advertise and enhance the low-interest rate, they may come with hidden fees. Therefore, you must know if there are any hidden fees and processing costs that may inflate the cost of the loan.


There are many benefits to getting a personal loan. The main advantage of a personal loan online is that it provides quick access to funds. Even so, there are still some cons, such as high-interest rates, dependence on technology, risk of fraud, overborrowing, etc. Despite that, it also comes with downsides, as stated in this guide. From these pros and cons, you will be able to decide whether or not to avail of a digital personal loan.