How Fintechs Give Loans to People with Lower Income

For years, securing a loan was very difficult if you had a low income or no credit, and because of that, high-interest loans from businesses like payday lenders seemed like the only way to borrow or even build credit. Big banks generally said no, because their rules were very strict. They were looking for high pay and a long time to borrow and pay back loans. This left many out. But now, “fintechs” have game them. They provide smart loans for everyone, even for those with a salary of less than 15,000.

It’s all been part of fintech companies’ ethos of using technology to make money simple. They have developed other ways to determine whether someone is a good borrower, without looking at a high salary or a pristine credit history. In this blog, we will look at how they are making credit available to millions of people who were left behind.

1. They Don’t Just Look at Your Salary

Traditional lenders only looked at a person’s monthly salary and credit score. If these numbers were low, they would say no. But fintechs are looking at many other things. They know that someone may have a stable income without an extravagant one, or might have recently started with a new job and does not have a long credit history.

• Looking at Your Phones and Social Media: Some fintechs examine the way you operate your phone. They could monitor your call logs, the apps you use, and even your social media. Now, that might sound odd, but this is how they get to know your daily life and routines. 
• Looking at Your Digital Footprint: They also look into your digital “footprint.” This includes your online shopping habits, how you pay your utility bills, and other online payments. If you pay your electricity bill and mobile recharge regularly and you do not fall short of this credit, then it means that you are very good at managing money. This type of information is known as “alternative data,” and it allows lenders to look at a broader picture of you as a borrower than they might otherwise.

2. The Magic of AI and Big Data

How do fintechs look at all this information so quickly? The secret is in technology like Artificial Intelligence (AI) and Machine Learning (ML).

• AI for a Better Look: No need for a human to meticulously inspect each feature; the process is done in seconds by AI. The AI reviews everything you offer up, from your documents to your online behaviour, and then gives you a score. This score is not just about your salary; it’s about your overall financial behaviour. This smart system can even anticipate whether you will be able to repay a loan. For us (who need a personal loan under 15,000 salary), such a quick and intelligent check is a boon.
• Big Data for Better Decisions: These companies leverage “Big Data,” which is when an enormous amount of information is gathered from numerous places, portrayed as follows. By examining the data of lots of people, the AI can learn what makes someone a good borrower. This makes it able to be more fair, even to one who does not have a formal job or much credit history.

3. Easy and Quick Process

Fintechs have made getting a loan super simple. The process is all about making things easy for the customer.

• Online Application: You don’t need to go to a bank. You can apply for a loan from anywhere, anytime, using a mobile app. The application form is short and easy to fill out. You just need to have your Aadhar card and PAN card with you.
• Minimal Documents: Fintechs only need a few pieces of paper, while old banks needed a lot. For this reason, their smart systems can get most of the data they need from the data you share online. That’s part of what makes the process so simple and a large part of the reason why a loan like a 5000 loan online can be approved and delivered to you in minutes.
• Quick Decision: As technology is doing most of the work, the decision on your loan is made very quickly. You don’t need to wait days or weeks to see if a lender can give you a loan. Speed is a giant plus, particularly for those who are desperate for money.

4. How This Helps Everyone

By using these new methods, fintechs are helping people who were left out of the financial system.

• Financial Inclusion: For a long time, a large part of the population had no access to loans. Fintechs have changed this. They are giving loans to a new group of people. This allows them to run their daily life, to create an enterprise, or to face unexpected costs. We call that “financial inclusion.”
• Building a Credit History: Borrowing from a fintech and repaying the money on time can help the person build a credit history. This credit record is then filed. By that logic, it will be easier for them to get bigger loans from other banks in the future, too. It lets them enter the formal financial system. For someone who has managed a personal Loan of under 15,000 salary well, a bigger world of loans opens up.
• Specialized Products: Fintechs also make special loan products for people who work in the gig economy or have low salaries. They understand that these people might have a different type of income stream than someone with a regular job. They are more flexible and willing to work with these groups. Companies like Stashfin, for example, have created special loan products that are designed for people who need a quick and easy loan to meet their financial needs.

Conclusion

Fintechs are not just making loans faster; they are making them fairer and accessible. They are looking beyond traditional rules and using technology to understand a person’s true financial behavior. By doing so, they are giving a chance to millions of people who have been overlooked for years. They have made it possible to get a loan even if you have a low salary or no credit history. This change is not just about money; it’s about giving people a better chance at a stable and secure life.

FAQs

Q1. Are fintech loans safe? 

Yes, most reputable fintech companies in India are licensed and regulated. It’s always a good idea to check if a company is registered with the Reserve Bank of India (RBI) before you apply for a loan.

Q2. How is a fintech loan different from a bank loan?

 Fintech loans are usually much faster and have a simpler process. They use technology to make a quick decision and often need fewer documents. They are also more willing to look at your financial situation in a new way.