The Reserve Bank of India in a recent report revealed that in India, around 1,100 online loaning apps exist across internet platforms. However, quite shockingly, as many as 600 of these apps for Android users in India, operating across over 80 application stores, were illegal. Proposing a stronger regulation for these digital lending apps, a working group set up by the central bank has recently sought legislation to subject these apps to verification to prevent scams. The committee was set up following complaints of digital loan frauds including harassment and unfair recovery activities by several apps operating digitally. Digital loans are often full of scams but can be avoided if certain rules are followed.
Acknowledging the importance and advantages of technological advancements, the report said, “…there have been unintended consequences on account of greater reliance on third-party lending service providers mis-selling to the unsuspecting customers, concerns over breach of data privacy, unethical business conduct and illegitimate operations.”
Keeping this warning in mind, it is important for users to follow a few thumb rules while taking a loan from these instant digital loan apps, till the Centre or the RBI come up with new rules. “A nodal agency should be set up which will primarily verify the technological credentials of DLAs of the balance sheet lenders and LSPs operating in the digital lending ecosystem. It will also maintain a public register of the verified apps on its website,” the RBI suggested in its report.
Here are the things you should keep in mind while taking loans from digital loan applications of DLAs:
– Check if Your Lender is RBI Approved
You must be aware if the lender you are taking the loan from is registered with the RBI. You should first verify the creditor’s credibility, so that there are no issues while repayment of the loan. Lenders who do not follow the KYC norms of the RBI should immediately become a suspect, since they are not following the central bank’s guidelines.
– Look Out for the Red Flags
On contrary to credible digital loan apps, which all follow all RBI-mandated rules, the scammers usually do not even have a website. Even if some of them are listed, you need to thoroughly go through them to make sure the apps are not run by fraudsters. You can also read reviews of the app in the app store before making any decision. Additionally, check if the app works with a non-banking financial company or NBFC registered with the RBI or a bank. Visit that NBFC to make sure they are actually working with it.
– Read and Understand the Terms and Conditions
Before clicking on the ‘Proceed’ button, it is always important for you to read and understand the fine print. It is significant for everything else, but especially important for digital loan apps. Read the terms and conditions before coming to a decision.
– Deny loans from unofficial sources
Steer clear from non-verified loan apps as increased use of technology has given rise to increased cyber crimes related to borrowing. You must be cautious of non-verified digital loan apps asking for personal details like bank details, credit card PIN or addresses.
– Do Not Just Look for Lower Interest Rates
There are many other things apart from interest rates that you should look into. If there are a lot of pre-payment charges, processing fees or pre-closure charges, you should avoid those apps.
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