Borrowing from loan apps is easy. The credit is available instantly and no major documentation is needed for the same. The borrower has to be sure of the repayment. A loan borrowed from the loan apps on the internet has a lot of other sides as well. The loan can be availed with the click of a button but access to all personal information is provided to these applications. Thus harassment cases are on the rise in case of loan borrowings from these apps. Recent studies have reported that such harassment cases increased during the pandemic.
Imagine people from your contact list getting updates regarding your inability to repay a particular loan.
Things to be Aware of Before Availing Loans:
The interest rates on various loan apps are different and change from one app to the other. The rate is generally very high as compared to the loan rates offered to the borrower by the banks or other financial institutions. Sometimes an interest rate of 12-36% is charged by the loan app lenders to the borrower. Loan apps also lure borrowers to borrow more credit by offering them various advantages over other apps. The penalties and processing fees for these loans are huge and thus the loan is not a cheap option as compared to personal loans. The loan operators have not only stopped the extortion of borrowers but they have used the contacts of the above to harass the family members as well.
A lot of apps are also illegal among the apps available in the market. Therefore, the RBI has posted a list of these illegal apps in the market.
Check details of the Lender
The borrower should avoid falling into the trap of illegal borrowers. The history and credibility of borrowers should be validated by the borrower before availing of the loan. The borrower should check the website and see if it leads to a secure page where all the information is stated and the website seems to be valid. A genuine lender will ensure that all the information of the borrower is secure and is not shared with any other entity.
Lender is Pressurizing
If the lender is pressurizing the borrower to act immediately and borrow the loan immediately, the borrower should be alerted and should inform the respective authorities of the same. The lenders will always have a certain timeline that they give to the borrower to accept the terms and conditions and then borrow the loan. A valid lender will always explain the terms and details like the interest rates, and repayment terms to the borrower. The borrower can also inspect the lender information from online reviews and on certain platforms and discussion forums.
The lender is Not Validating Credit History
If the lender is not validating the credit history of the borrower, then there is something fishy and doubtful about the lender. The lender will generally as a rule of thumb always validate the credit history of the loan applicant. If not, the chances that the lender is offering a scam are more. The lenders who are interested in creating a scam are always looking for high-risk debtors who will borrow loans out of desperation and will not do complete research on the lender.
Checking Physical Existence
Before availing any loan, the borrower should always check that the lender has provided a physical address of his office or the workplace. If no indications are present which show the official address of the lender then the validity of the loan should be questioned by the borrower. Many lenders who are involved in scams will not provide any address or details so as to avoid any legal consequences which can arise later.
A lot of small lenders who are involved in scams won't even have a legitimate address or any kind of contact information on their websites. They will charge an upfront fee that ranges from Rs 100 to Rs 400 and after payment the site is redirected to another page. This is a small-scale scam where the borrower collects money from the new applicants and the process does not go ahead.
Thus the applicant should always check the factors listed below
Check for the contact information of the lender and try to examine the validity of the same
The online reviews will also help in affirming the existence of the company and hence the lender can be validated
The RBI issues a license for mobile-only NBFCs. This license can also be checked by the borrower before availing of the new loan.
While a personal loan requires a lot of documentation and validation, the fintech loans which are available are much easier to avail. But the conditions and the prerequisites are checked in the former and not the latter. The borrower should be aware of all the risks and costs related to these fintech loans. The lender information should always be validated and researched by the borrower.
FAQS of Checklist Before Borrowing From Loan Apps:
1:How to file a complaint against an instant loan app?
The individual can file a complaint against the loan app on the National Cyber Crime Portal
2:How to identify a fake loan app?
A fake loan app can be identified by evaluating a lot of factors such as the physical existence of the lender, the terms and conditions laid down by the lender and also by reviewing the list of authentic NBFCs which is published by the Reserve Bank of India.
3: Are loans offered on loan apps cheaper than personal loans?
No, the loan apps will charge a very high-interest rate than the personal loans and thus they are not cheap as compared to the personal loans available in the market.
4:Is a good credit score necessary for availing a loan from a loan app?
Yes, the credit history of the borrower is evaluated even though the loan is availed from a loan app.