MoneyTap: India’s first “Line of Credit” App; Now pay interest on what you use

Envision a system where borrowers can ask for a certain amount, however they don't need to use it all. Rather, borrowers can modify what they spend to their needs, and they just need to pay interest on the amount they spend, not on the whole credit line. In addition, customers can likewise modify their repayment amounts as required, taking into account their budget or cash flow. For instance, borrowers can repay the whole outstanding balance without a moment's delay, or they can select to simply make the base monthly payments.

Well, it’s a reality now! Bangalore based startup MoneyTap has launched a similar system in their app. Founded by Bala Parthasarathy, Anuj Kacker and Kunal Varma, the app aims to empower the middle class consumer with loans starting from Rs 3,000 to Rs 5 lakh.

“Growing up in India in the eighties and nineties, and coming from middle income group families, we have all faced shortage of additional funds at some point. At MoneyTap, we’re on a mission to change this and make credit accessible to those who deserve it,” said Bala.

6 Steps & you’re done

1. Install app and provide your details to the integrated chatbot
2. Get a pre-approval upto Rs 5 lakh
3. Upload KYC Documents and receive money in just a couple of days
4. Choose amount to be withdrawn and EMI tenure (2-36 months)
5. Money will be transferred in your bank account instantly
6. Repay EMIs on time to keep your credit line stagnant

The app is available for all salaried employees across metro cities and plans to expand in other cities in the next few months.

Banks & Rate of Interest

The app was launched in partnership with RBL Bank. When asked, Bala clearly stated that they’re planning to collaborate with other banks but for now it’s RBL.

The rate of interests for loans vary from 1.25 - 1.5% per month and the application has a set-up fees of Rs.499-in addition to taxes to be paid to the bank.

“We are delighted to partner with MoneyTap to launch India’s first app based Credit line. We have integrated MoneyTap’s technological innovation with our own banking system to provide a never-before 24/7 experience for users without compromising on security and compliance issues,” Harjeet Toor, Head - Cards, Retail & MSME Loans and Financial Inclusion, RBL Bank, said in a statement.

This will of course help RBL extend its user base by offering small loans and the credit market

Market & A ‘Revolving Cycle’

With a line of credit, everything of the loan is accessible once it is allowed. This allows borrowers to access as much or as meagre as they need contingent upon their current needs. As the balance owed is paid down, borrowers can likewise withdraw the funds again, making the line of credit an ever revolving cycle.

Credit markets have stretched insanely in response to the financial crisis, and a few analysts predict that things will deteriorate before they show signs of improvement. The kneejerk reaction by numerous credit card backers has been to get control over credit lines trying to fight off enormous losses or meet stringent regulatory requirements for having a certain amount of cash in reserve in proportion to how much credit they have extended. Sadly, this reaction may have an unintended impact of hindering profitability.