How to Stay Safe From Dangers of Instant Loan Apps? A Credit Expert Suggests 5 Essential Tips
Instant loan apps offer a quick solution to financial needs and emergencies. With their promise of quick and convenient access to funds, they have quickly become the popular choice of many borrowers.
However, amidst the growing popularity of these apps, there also lies the hidden danger of fraudulent and illegal players. How then can one stay vigilant? Sidharth Vishwanathan, chief risk officer (CRO) at KreditBee, suggests five essential tips before accessing an instant loan app:
Verify the identity of the app: Legal instant loan apps have a physical presence along with an online presence such as a website and social media accounts. To stay safe, always download the application from verified app stores only. It is also a good practice to check for news articles or reviews from reputable media outlets to gauge the app’s reputation and practices.
Look out for regulatory compliance: Ensure that the app is partnered with an RBI-registered financial institution or directly regulated by the RBI. Such apps are bound by regulation and have to adhere to ethical lending practices. Visit the RBI website or contact their helpline to confirm the lender’s registration status.
Data Privacy: Lending apps must get consent from borrowers to access their data. According to RBI guidelines, the loan app can access borrowers’ data once for KYC procedures, including the camera, microphone, location, and any other necessary facilities.
Transparency in information: Look for apps that disclose repayment terms, interest rates, processing fees, and late payment charges upfront. Also, the RBI mandates digital lending platforms to disclose the name of the bank(s) or NBFC(s) they represent. Any financial institution providing loans through a fintech app or an instant loan app is required to provide a Key Fact Statement to the borrower before the loan is sanctioned.
Loan disbursal: The sanctioned loan must be deposited only into the borrower’s bank account, without involving any pass-through accounts. Thus, if a digital lending app lends through a bank or an NBFC to offer a loan, they will have to transfer the funds directly to the borrower’s bank account, to ensure transparency in the process.
It’s important to exercise due diligence and caution when dealing with any financial institution, including instant loan apps. Conducting thorough research, verifying information, and comparing offerings from multiple lenders will help you make an informed decision.