Key things to keep in mind to avoid online loan fraud
The Reserve Bank of India in a recent report revealed that in India about 1,100 online lending applications exist on internet platforms. However, shockingly enough, up to 600 of these apps for Android users in India, operating in over 80 app stores, were illegal. Proposing stricter regulation for these digital lending apps, a task force set up by the central bank recently called for legislation to subject these apps to verification to prevent scams. The committee was set up following complaints of digital lending fraud, including harassment and unfair recovery activities by several digitally powered apps. Digital loans are often full of scams but can be avoided if certain rules are followed.
Acknowledging the importance and benefits of technological advancements, the report states: “…there have been unintended consequences due to a greater reliance on third-party lending service providers who wrongly sell to customers without mistrust, concerns about breach of data privacy, unethical business conduct and illegitimate transactions.
With this caveat in mind, it is important that users follow a few basic rules when taking out a loan from these instant digital loan apps, until the Center or the RBI come up with new rules. “A nodal agency should be set up that will primarily verify the technology credentials of DLAs of on-balance sheet lenders and LSPs operating in the digital lending ecosystem. It will also maintain a public registry of verified applications on its website,” suggested the RBI in its report.
Here are the things you need to keep in mind when taking out loans from DLA’s digital loan applications:
– Check if your lender is approved by RBI
You need to know if the lender you are taking the loan from is registered with the RBI. First you need to check the credibility of the creditor, so that there are no problems when repaying the loan. Lenders who do not meet the RBI’s KYC standards should immediately become suspect, as they are not following the central bank’s guidelines.
– Watch out for red flags
Unlike credible digital lending apps, which all follow all the rules imposed by the RBI, scammers usually don’t even have a website. Even though some of them are listed, you should go through them thoroughly to make sure the apps are not run by scammers. You can also read the app reviews in the app store before making a decision. Also, check if the app is working with a non-bank financial company or NBFC registered with the RBI or a bank. Visit this NBFC to make sure it actually works with it.
– Read and understand the terms and conditions
Before clicking the “Continue” button, it is always important that you read and understand the fine print. It’s important for everything else, but especially important for digital lending apps. Read the terms and conditions before making a decision.
– Refuse loans from unofficial sources
Avoid unverified loan applications, as the increased use of technology has led to an increase in loan-related cybercrimes. You should beware of unverified digital loan apps asking for personal information such as bank details, credit card PIN or addresses.
– Don’t just look for lower interest rates
Besides interest rates, there are many other things you should look into. If there are a lot of prepayment fees, processing fees or pre-closing fees, you should avoid these applications.