A Reserve Bank of India (RBI) digital lending task force, which includes lending through online platforms and mobile apps, has found that more than 600 illegal lending apps are operating in India. Most of these apps, used to deceive innocent people, are available on multiple app stores for Android users around the country, the task force said in a report. While trying to prepare a detailed report on digital loan applications in India, the working group discovered that there are over 1,100 loan applications, which could be searched using keywords such as loan, loan instant and quick loan. All of these apps were available in 81 app stores from Jan.1, 2021 to Feb.28, 2021, according to the task force.
These apps, which are not under any regulatory body, typically charge high interest, gain access to phone data, and harass users for defaults.
Today, with a plethora of fintech lending companies offering personal loans on their apps, borrowers are likely not to know which one to choose for their borrowing needs and may even fall for fraudulent loan apps offering a instant credit online. Needless to say, borrowers should be very careful before selecting or using any loan application.
Here are the key things that users should check before selecting a loan application.
Know the lender
Check the credentials: Make sure to verify the credentials of the lending company. âIt is imperative for a borrower to verify the credentials of the lender and only work with an RBI registered lender, whether it is a bank or a non-bank financial company (NBFC ), âSays V. Raman, Founder and Chairman of CASHe, a financial credit technology platform that offers a wide range of consumer lending products and services, including personal loans.
RBI Registration: Just as lenders perform KYC for each loan applicant, borrowers should also know their lenders before applying for a loan. They must identify lenders registered with the RBI. âRBI-approved lenders follow a strict set of guidelines and have established a code of conduct that ensures transparency, ensuring the best possible borrowing experience for everyone. If a lender is not approved by the RBI or does not have an Indian incorporation, it is most likely unauthorized and is not bound by confidentiality rules set by the regulator, âsays Raman.
Check out the reviews: Is the company known or is it a reliable brand? âIt’s a good idea to check the app store ratings and reviews before choosing a lender. The information provided on the app stores gives the borrower a good idea of ââhow the lender works, and any unethical behavior on the part of the lender will be reported or reported by existing borrowers. Look for people who have reviewed the lender. The borrower should check the background of these apps before trusting any of these apps. It is advisable to only trust well-known brands in order to be assured of the authenticity of transactions, âsaid Raman.
Check if the website is secure: Most often the app listing website is a secure website. A secure website always has https: // written before its website address. This protects your data from cyber criminals.
Check if the lender has a physical address: Make sure the lender you are borrowing from has given a physical office. If the borrower cannot find a genuine physical address, it is better to stay away from these lenders. Rather, most unauthorized loan applications would be invisible to avoid legal consequences.
Know the lending practices
Access to personal data: Some loan applications require permission to access contact details for underwriting and authenticity checks. Although it is a common practice, responsible lenders keep this information completely confidential; that is, they do not disclose the data to third parties in any way. Additionally, responsible digital lenders protect their data by performing regular information security audits to mitigate data theft.
Tech-savvy lenders also use AI and ML-based techniques to automatically guarantee loans and adhere to collection procedures formulated by the RBI. This eliminates their dependence on contact lists, thus putting an end to any fraudulent activity. Borrowers should know about these best practices before choosing a lender.
Costs and fees: Borrowers should be aware of the costs associated with their loans and should read the information carefully to know about the hidden charges associated with their loan. Fraudulent apps often have high interest charges and processing fees which invariably add up to an extremely high cost. It is advisable to choose digital lenders who are transparent in their lending transactions with their borrowers to help them keep borrowing expenses under control.
Google Play Store standards
Borrowers should be aware that Google Play Store prohibits lending of apps that offer loans for less than 60 days. Checking this detail will help borrowers protect themselves against fraudulent loan companies.