TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Online loans: Easy and practical, but too costly
They are five things that both individuals and business owners need to know before applying for online loans.
Change Size
Online borrowing is gaining popularity in Indonesia, as it is now easy for people to use the internet to access funds. There are 28 financial technology (fintech) startups that are already registered with the Financial Services Authority (OJK). (Shutterstock/File)
O
nline borrowing is gaining popularity in Indonesia, as it is now easy for people to use the internet to access funds. There are 28 financial technology (fintech) startups that are already registered with the Financial Services Authority (OJK). These fintech startups offer financing and money lending through their websites or apps, which can be downloaded freely.
The online borrowing is done through peer to peer lending (P2PL), in which borrowers are matched with lenders. People who want to borrow money can go through this channel after submitting a request. Some fintech startups even ask you to connect to their social media accounts.
Then, the fintech company will assess your credit rating, like a bank does, and will inform you whether or not you are eligible for credit. They will also assess the risk level of your borrowing. The higher the risk, the more interest you have to pay, while those whose risk is deemed to be lower will pay less interest.
Another mechanism apart from P2PL is direct lending, where the fintech startup itself is the lender. So in this case, people use the website or application for borrowing only. Most fintech startups require no collateral or guarantee from their borrowers.
Besides individuals, these new platforms also cater to businesses, mostly for micro, small and medium enterprises (MSME). Companies need to have been operating for at least a year, to ensure that they can run the business well. However, a number of aspects should be considered. They are five things that both individuals and business owners need to know before applying for online loans.
First are the fees. There are many kinds of fees, such as the platform fee, service fee, administration fee for the fintech, which range between 3 percent and 5 percent of the loan amount. There are also other fees, such as the insurance fee, late charges and the collecting fee. Fintech companies use these fees to cover operational costs and maintain their platform.
Second is the interest rate. Fintech companies generally apply an annual or monthly interest rate. You can ask them what effective interest rate they charge for borrowing money using their platform. For example, there is one platform that provides individual loans with a daily interest rate of 1 percent, with loans ranging from Rp 1 million (US$75) to Rp 3 million.
