Key things to keep in mind to avoid online loan fraud

The Reserve Bank of India in a recent report revealed that there are around 1,100 online loan apps on Internet platforms in India. However, surprisingly, as many as 600 of these apps for Android users in India, operating in over 80 application stores, were illegal. By proposing tougher regulation for these digital lending apps, a working group set up by the central bank recently sought legislation to test these apps to prevent scams. The committee was set up following allegations of digital loan fraud, including harassment and unfair retrieval activities by several digitally-operating apps. Digital loans are often full of scams but can be avoided if you follow certain rules.

Recognizing the importance and benefits of technological advances, the report states: “… there have been unintended consequences due to an increased reliance on third-party lending service providers who mis sell to unsuspecting customers, breach of data privacy, unethical business conduct and illegitimate operations “.

With this caveat in mind, it’s important that users follow a few rules of thumb while taking out a loan from these instant digital loan apps, until the Center or RBI comes up with new rules. “A nodal agency should be created that will primarily verify the technology credentials of the DLAs of budget lenders and LSPs operating in the digital lending ecosystem. It will also maintain a public record of verified apps on its website, ”the RBI suggested in its report.

Here are the things you should keep in mind when borrowing from DLA’s digital loan applications:

– Check if your lender is approved by the RBI

You need to know if the lender you are borrowing from is registered with the RBI. You should first check the credibility of the lender, so that there are no problems when repaying the loan. Lenders who do not follow the RBI’s KYC rules should immediately become suspect, since they do not follow central bank guidelines.

– Watch out for the red flags

Contrary to credible digital lending apps, which follow all the rules imposed by the RBI, scammers usually don’t even have a website. Even though some of them are listed, you need to go through them thoroughly to make sure the apps aren’t run by scammers. You can also read the app reviews in the app store before making any decisions. Also, check if the app works with a non-bank finance company or NBFC registered with the RBI or a bank. Visit that NBFC to make sure they are actually working on it.

– Read and understand the terms and conditions

Before clicking the “Proceed” button, it is always important to read and understand the fine print. It’s significant for everything else, but especially important for digital lending apps. Read the terms and conditions before making a decision.

– Deny loans from unofficial sources

Avoid unverified lending apps as increased use of technology has resulted in an increase in lending-related cybercrimes. You need to be on the lookout for unverified digital lending apps that ask for personal details like bank details, credit card PINs or addresses.

– Don’t just look for lower interest rates

There are many other things besides interest rates that you should look into. If there are a lot of prepayment fees, processing fees, or pre-closing fees, you should avoid these apps.

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