New Delhi: According to a recent estimate by the Reserve Bank of India, there are more than 1,100 online lending applications available in India on various internet platforms. Surprisingly, more than 600 of these apps for Android users in India were illegal and they were distributed in more than 80 app stores.
A task force set up by the central bank recently proposed legislation that would subject these digital lending apps to verification to prevent scams. The committee was formed in response to accusations of digital lending fraud, which included harassment and unfair collection 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 due to a greater reliance on third-party lending service providers wrongfully selling to unsuspecting customers, concerns about data privacy breaches, business conduct unethical and illegitimate operations,” the report says, acknowledging the importance and benefits of technological advances.
With this warning in mind, customers should follow a few simple guidelines when taking out a loan from these fast digital loan apps, at least until the Center or the RBI issue new guidelines. “In the digital lending ecosystem, a nodal agency should be created to assess the technology credentials of on-balance sheet lenders’ DLAs and LSPs.” The RBI said in its report that “it will also maintain a public register of verified applications on its website.”
Things to keep in mind when taking loans from DLA’s digital loan applications:
Check if your lender is RBI approved
You should check with the RBI if the lender you are borrowing from is registered. You must first check the credibility of the creditor to ensure that there are no problems with the repayment of the loan. Lenders who do not follow the RBI’s KYC guidelines should be immediately considered suspects as they are not following the central bank’s guidelines.
Keep an eye out for red flags
Unlike legit digital lending apps that adhere to all regulations imposed by the RBI, scammers rarely have a website. Even though some of them are mentioned, you should review them carefully to make sure the apps are not being used by scammers. Before making a selection, you must check the app reviews in the app store. Also check if the app works with a bank or Non-Banking Financial Firm (NBFC) registered with the RBI. Check with that NBFC to see if they work with it.
Read the Terms and Conditions and make sure you understand them
It is essential that you read and understand the fine print before clicking the “Continue” button. It’s vital for everything, but it’s extremely crucial for digital lending applications. Before making a selection, read the terms and conditions.
Refuse to accept loans from unauthorized sources
Avoid unverified loan applications, as the increasing use of technology has led to an increase in loan-related cybercrime. Unverified digital loan apps that seek personal information such as bank account numbers, credit card PINs, or addresses should be avoided.
Look for more than lower interest rates
Apart from interest rates, other additional factors should be taken into account. You should avoid applications that have a lot of prepayment, processing, or pre-closing fees.