The crackdown on fake loan apps came heavy as the government of India had 27 online loan apps banned in India, early on this year. This decision was carried out by the Ministry of Electronics and Information Technology (MeitY) after reciveing a request from Ministry of Home Affairs. Too many fake lending apps had been lurking on Playstore and Appstore cheating users off their money. Unfortunately, this was in a climate when people were in need of funds, usually after being turned away by traditional lenders.
These incidents shook the trust people had in these lending apps quite a bit. But it was not all gloom and doom as there were trusted apps that also helped several people secure funds instantly. This proves one thing – the market for Fintech companies is here to help and it is growing.
Even if you have a below-average credit score, there are plenty of companies that offer legitimate loans. When searching for a good lender, start with these steps:
- Check for contact information. A lender’s phone number, email address and physical address should be readily available on the website, even if it’s an online-only lender.
- Investigate online reviews. Customers posting online will have the best insight into the experience of working with a lender.
- Look at the various professional websites that review various loan apps time to time, it is a good way to find out if a lender is trustworthy.
- Make sure it has a Reserve Bank of India’s (RBI’s) mobile-only Non-Banking Financial Company (NBFC) license which allows them to give you that loan.
12 Pointers that will help you determine the Legitimacy of the Loan Apps
1. Check the Credentials
A borrower should check the lender’s credentials and only work with an RBI-registered lender, whether it’s a bank or an NBFC. Ratings and reviews are important; when choosing a lender, it’s a good idea to look at the ratings and reviews. This will provide the borrower with a good sense of how the lender operates, and any unethical behaviour by the lender will be reported by previous borrowers.
2. Read the Reviews
A lot of times, you can get a hint about the app’s authenticity from its user reviews. If the app has managed to frustrate a few borrowers enough, there will be a review or two about it. So, read the reviews before you download the app.
3. RBI Approved
It is mandatory for every lender to be registered with the central banking authority, the Reserve Bank of India. If an app is stating so on their website but is unable to display their company identification number (CIN) and details of the certificate of registration (CoR) with the RBI, avoid them.
4. Personal Data Access
Some lending apps require gallery and contact access to conduct underwriting and authenticity checks. Responsible lenders keep this information confidential and avoid disclosing it to third parties at all costs. In today’s environment, lenders have become highly capable in terms of underwriting systems and adhering to vetted collection processes. This eliminates their reliance on contact lists or gallery access, effectively putting an end to any fraudulent activity. Furthermore, responsible digital lenders keep their data secure by performing Information Security Audits and regularly monitoring AI functionality. Awareness is your best defence. Do your due diligence.
5. Lender’s Website is not secured
When visiting a lender’s website, look for a padlock icon on any pages where you are asked to provide personal information. HTTP:// websites are secure because they are guarded against identity thieves who steal personal information and sell it to others. A reputable lender will protect you from loan scams by ensuring that your data is secure and will not leave your information accessible to others.
Physical address: The app/fintech from where you plan to borrow a loan should have a physical address. If you cannot find any legitimate physical address, you should avoid the loan. Many loan scammers prefer to remain anonymous in order to avoid legal repercussions.
6. No Sanction Letter
According to an RBI mandate, before issuing a loan, every lender must share a sanction letter along with important details of the loan. Unauthorised apps will not be able to share such a letter and you should never go ahead with the process.
7. Ensure the lender cares for your Credit History
The first thing any legitimate lender wants is your payment history. It provides a base for your capability of paying back the loan. It is also a factor to determine your chances of loan approval and the rate of interest.
8. Upfront Fee
Many small lenders levy an upfront application fee or membership fee ranging from Rs. 100 to Rs. 400 on their apps. Once the borrower furnishes the fee they are redirected to other applications where they can apply. Because many of the smaller lending applications don’t have a website or aren’t even licensed, they work with other bigger lenders. Keep this in mind before zeroing in on the lender.
9. Avoid Deadline-Ridden Offers
Fake lending apps have just one goal take your money and disappear. So, they may shower you with what may seem like attractive deals and say that it is for a limited time. Legitimate lenders will not pose such deadlines and would have a list of protocols for initiating any kind of funds transfer. If you are being forced to act quickly then be assured that you are being scammed and the app is a fake.
10. Google Play Store Norms
Google Play Store doesn’t allow apps that offer loans with tenures below 60 days. Beware of small entities and protect yourself from fraudulent lending companies.
While lending apps can be a fantastic way to get a quick loan, protecting oneself from many fraudulent fintech loan apps is critical. It is also important in these times to be financially aware and digitally savvy in order to avoid illegal lenders and only borrow from RBI-registered sources.
11. Inappropriately Disclosed Fee
If your lender isn’t revealing the comprehensive details of the application, appraisal or credit report fees, turn them down instantly.
12. The lender has no Physical Address
Make sure the lender you’re interested in has given a physical office location. If you don’t find any indicator of an authentic physical address, you should stay away from the lender. Many operators of loan scams would rather be invisible so they can avoid legal consequences.
These apps on the pretext of providing credit/loans charge an upfront application fee or membership fee ranging anywhere between Rs 100 and Rs 400. The user is then redirected to other apps to apply. Many of the smaller lending apps don’t even have a website and are not even licensed, therefore, their authentication is impossible.