Building a better credit history can lead to better credit products and terms in the future, says Yogi Sadana of Zype

The most important thing that a borrower must do is verify whether the loan app that they decide to borrow from is partnered with an RBI-registered NBFC or bank, says Yogi Sadana, Founder and CEO, Zype.

In an interview with MintGenie, Sadana said that customers should try to build a better credit history which in the long term would be significantly advantageous to them to get better credit products and terms in the future.

Edited Excerpts:

How do you view the significant changes by digital NBFCs and fintech apps in the digital lending sector, and how do you advise borrowers to benefit from this dynamic landscape?

We have seen increased credit accessibility for customers due to the digital revolution we have seen in the lending ecosystem. The digital lending space has led to more convenience for borrowers and increased inclusion for the underserved segment of users, especially customers who are new to credit or have shorter credit history that largely does not fit the lending criteria of traditional lenders. We have also seen a rise in credit products that are more personalised and tailored to the different needs of the customers.

Customers can benefit from this shift by now choosing products based on their needs and requirements by opting for tailored and personalised products that fit their needs instead of having to choose products that had a one-size-fits-all approach in the past. Customers should use these smartly to build better credit history which in the long term would be significantly advantageous to them to get better credit products and terms in the future.

There are multiple players in the digital lending ecosystem of India. How do you advise borrowers to choose the one that would meet their needs without paying out more in charges and interest?

The biggest advantage of the digital lending ecosystem that we are part of today allows the customer to compare credit products, tenures, and eligibility for higher amounts easily. This can help them choose a lender and credit product that suits their need and ability to repay without getting themselves into financially stressful situations. Another advice for the customers would be for them to check the experiences that other customers and borrowers have had with lenders and loan apps before borrowing from them. This can easily be done by checking the Play Store/App Store or by just doing a simple Google search.

The digital lending market is getting more robust. However, this has also increased the chances of borrowers succumbing to fraud. How do you think one can avoid being susceptible to fake loan apps and sites?

The most important thing that a borrower must do is verify whether the loan app that they decide to borrow from is partnered with an RBI-registered NBFC or bank. This can be checked by looking at the website or Play Store/App Store description of the lender. Secondly, users should only install the loan app from the Google Play Store or Apple App Store. They should never download the loan app from any web link that might be shared on SMS, WhatsApp, or social media even if they receive it from their family or friends.

Do you perceive certain digital lending products or types of loans to have substantial growth potential in the near future?

I anticipate growth in credit line products and their adoption due to the flexibility that they provide to borrowers. It allows for instant access to credit at the time of need and the borrower is only charged for the amount borrowed. Embedded finance is one other such product due to its frictionless nature. Since credit is made available at the point of sale it allows users to get access to instant credit in their purchase journey itself.

Credit accessibility is a huge pain point in India. Do you think the growing fintech ecosystem can handle the current credit requirement? How do you envision the growth of the digital loan sector in India in the coming years?

Growth in the fintech ecosystem is already bridging the gap between demand and supply for unmet credit needs, especially in the near prime and medium value loan segments, and it will continue to do so in the future. This is due to the next generation of borrowers in India already being digital natives and adoption becoming easier for them. The industry is set to grow as there is continuous growth in demand with the rise in the middle class and their increasing aspiration to spend on affinity products and experiences. We will only see a rise in consumerism going forward and this will only drive increased demand for credit.