Fintech does provide easy access to loans. But behind that, there is a high interest that must be paid by the borrower. What is the reason for fintech interest higher than the bank?
The presence of financial companies such as Fintech is a solution for people who need additional funds quickly, as well as a frightening specter because the interest on loans is valued higher than the bank.
Whereas for loan interest matters, every fintech company already has transparent rules to determine the amount. Where the amount of Fintech loan interest must take into account the nominal to the term of the loan.
Fintech interest is higher than the bank
At present, interest on loans from Fintech averages 19-22% per year . This interest is claimed to be higher than bank interest which is only 18-21% per year . The difference of around 1% is considered not worth the risk faced by Fintech. Yes, the risk of fintech as a loan service company is indeed valued higher than the bank. The reasons for higher fintech interest from banks are as follows:
- Fintech provides access for consumers who cannot make loans through financial institutions such as banks so that the determination of high interest rates is done to avoid the loss of borrowed money.
- Fintech consumers are consumers who can borrow unreserved money such as banking so that high interest is applied in this service.
- High interest is carried out as a reserve fee to reduce credit risk because after all a fintech company must maintain a smooth return to investors despite a loan default by the borrower.
- Not all fintech companies have credit insurance so that if a loss occurs, fintech companies must handle it themselves. Moreover, fintech loans are generally unsecured.
The advantages of Fintech from the Bank
Despite having a relatively high interest from the bank, the existence of fintech is still favored by the people of Indonesia. This is due to the ease and speed of the loan process offered by Fintech.
In addition, to maintain higher public trust, fintech companies are also required to be more transparent to their customers. For investors or investors, transparency makes them feel safe and trusts with the money that has been given to borrowers. As for borrowers, transparency makes them better understand the risks that arise later.
This transparency is an option for investors and borrowers before they make transactions as lenders and borrowers on the P2P Lending platform . The risks that arise later are shown by the fintech company so that each party accepts the risks. So, there is no reason why fintech interest is higher than the bank!