The Reserve Bank of India, in a recent report, found that in India about 1,100 online loan applications exist on Internet platforms. However, shockingly enough, as many as 600 of these apps for Android users in India, operating in over 80 app stores, were illegal. Proposing stricter regulations for these digital lending apps, a task force set up by the central bank recently called for legislation to subject these apps to verification to avoid scams. The committee was set up following complaints of digital lending fraud, including harassment and unfair collection activity by several digitally-powered apps. Digital loans are often full of scams but can be avoided if certain rules are followed.
Recognizing the importance and benefits of technological advancements, the report said: “… there have been unintended consequences due to greater reliance on third-party loan service providers who sell poorly to clients. unsuspecting, concerns about data privacy breach, unethical business conduct. and illegitimate operations. “
With this disclaimer in mind, it is important that users follow a few general rules when taking out a loan from these instant digital lending apps, until the Center or RBI makes new rules. “A nodal agency should be set up, which will primarily check the technological credentials of DLAs of balance sheet lenders and LSPs operating in the digital lending ecosystem. It will also maintain a public registry of verified applications on its website, ”the RBI suggested in its report.
Here are the things you need to keep in mind when taking out loans from DLA digital loan applications:
– Check if your lender is approved by the RBI
You need to know if the lender you are taking the loan from is registered with the RBI. You must first check the credibility of the creditor, so that there is no problem in repaying the loan. Lenders who fail to meet the RBI’s KYC standards should immediately become suspects, as they fail to follow central bank guidelines.
– Watch out for red flags
Unlike credible digital loan apps, which follow all of the rules imposed by the RBI, scammers usually don’t even have a website. Even though some of them are listed, you should go through them in depth to make sure that the apps are not run by scammers. You can also read the app reviews in the App Store before making a decision. Also, check if the app works with a non-bank financial company or NBFC registered with the RBI or a bank. Visit this NBFC to make sure they are actually working with them.
– Read and understand the terms and conditions
Before clicking on the “Continue” button, it is always important that you read and understand the fine print. This is important for everything else, but especially important for digital lending applications. Read the terms and conditions before making a decision.
– Refuse loans from unofficial sources
Avoid unverified loan applications, as the increased use of technology has led to an increase in cybercrime related to borrowing. You should be careful of unverified digital loan apps that ask for personal information like bank details, credit card PIN, or addresses.
– Don’t just look for lower interest rates
Besides interest rates, there are a lot of other things you should be looking at. If there are a lot of prepayment, processing, or pre-closing fees, you should avoid these apps.