New Delhi: As per a recent estimate by the Reserve Bank of India, there are over 1,100 online loaning apps available in India across various internet platforms. Surprisingly, over 600 of these apps for Android users in India were unlawful, and they were distributed across over 80 app stores.
A working group established by the central bank has recently proposed legislation that would subject these digital lending apps to verification in order to prevent scams. The committee was formed in response to accusations of digital loan fraud, which included harassment and unjust recovery practices by many digitally operated apps. Scams abound in the world of digital loans, but they can be avoided if certain guidelines are followed.
“There have been unintended consequences on account of greater reliance on third-party lending service providers mis-selling to unsuspecting customers, concerns over breach of data privacy, unethical business conduct, and illegitimate operations,” the report said, acknowledging the importance and benefits of technological advancements.
With this warning in mind, customers should follow a few simple guidelines while taking out a loan from these rapid digital loan apps, at least until the Centre or the RBI issue fresh guidelines. “In the digital lending ecosystem, a nodal agency should be established to evaluate the technological credentials of DLAs of balance sheet lenders and LSPs.” The RBI indicated in its report that “it will also keep a public register of the verified apps on its website.”
Things to keep in mind while taking loans from digital loan applications of DLAs:
Check to see if your lender is approved by the RBI
You should check with the RBI to see if the lender you’re borrowing from is registered. You should first check the creditor’s credibility to ensure that there are no problems with the loan repayment. Lenders who do not follow the RBI’s KYC guidelines should be considered suspects right away because they are not following the central bank’s guidelines.
Keep an eye out for red flags
In contrast to legitimate digital loan apps that adhere to all RBI-mandated regulations, scammers rarely have a website. Even if some of them are mentioned, you should thoroughly review them to ensure that the apps are not being used by scammers. Before making a selection, you should check the app’s reviews in the app store. Also, see if the app works with a bank or a non-banking financial business (NBFC) that is registered with the RBI. Check with that NBFC to see if they are working with it.
Read the Terms and Conditions and make sure you understand them
It is critical that you read and comprehend the tiny print before clicking the ‘Proceed’ button. It’s vital for everything, but it’s extremely crucial for digital loan apps. Before making a selection, read the terms and conditions.
Refuse to accept loans from unauthorised sources
Avoid non-verified lending apps since the rising use of technology has resulted in an increase in cyber crime related to borrowing. Non-verified digital lending apps that seek for personal information such as bank account numbers, credit card PINs, or addresses should be avoided.
Look for more than just lower interest rates
Apart from interest rates, there are other additional factors to consider. You should avoid apps that have a lot of pre-payment fees, processing fees, or pre-closure fees.