Things you must know before taking loan from digital lending platforms
Although mired in controversies of late, these digital platforms have witnessed a steady flow of customers due to the seamless experience they offer
With the pandemic wreaking havoc, it has become cardinal to have enough funds to manage unforeseen emergencies. In such a scenario, digital lending platforms have gained a lot of traction as they provide a seamless experience to avail immediate credit needs. Mostly, these loans come with high-interest rates but have still managed to attract customers. This is because, with nearly 500 million internet users in the country, digital lending platforms have opened up opportunities for a large segment of the country’s population who may have been put off by the methods used by traditional lenders.
“Technology has substantially reduced the hassles associated with the borrowing process, eliminating paperwork, and shifting the entire customer journey online. The level of convenience and seamlessness offered by digital lending platforms is far greater as compared to traditional lending institutions especially after the Covid-19 pandemic,” said Gaurav Chopra, founder & CEO of IndiaLends, who is also the founding member of Digital Lenders Association of India.
Risks
But digital lending platforms come with great risks and the recent fraudulent lending apps fiasco did raise questions on the safety of digital lending apps. Followed by this, RBI has also decided to come down hard on fraudulent instant loan apps.
On December, 23, it also asked the consumers to report such apps to the law enforcement agencies or file an online complaint with the banking regulator.
Furthermore, RBI banned many such apps and for the convenience of the borrowers recently, it provided flexibility to borrowers in terms of repayment. At the time of the pandemic, this move has greater value.
“The Reserve Bank of India has announced a resolution plan or a one-time loan restructuring scheme allowing lenders to help affected borrowers by altering certain terms of their outstanding loans. This will provide borrowers with a little flexibility in terms of loan repayments, the interest cost, and loan tenure depending on the type of agreement with the lender,” Chopra said.
There are certain conditions attached to the loan restructuring scheme, based on which lenders will provide relief to affected borrowers. If you are facing financial difficulties because of the pandemic and are seeking relief with respect to your EMIs, you must submit a request to your lender to get your loan restructured.
Loan restructuring may be subject to additional charges, and though it may lower your EMIs, you will have to pay more interest due to the increased tenure.
Being extra cautious
Many websites and loan portals are secure and you can trust them to keep your information safe, but there are also many websites and apps which may turn out to be fake and breach your privacy.
Although most of the fake apps have been taken down by Google, it is important for the borrowers to exercise caution and vigilance while opting for a digital lending app or before sharing their personal information, according to Chopra.
Checklist
Check the creditability of the lender: While applying for a personal loan online with a particular lender, the first step is to review the Developer Section of the App’s Playstore page as most fake apps don’t list their website. Along with that, you need to check whether the lender you have approached is genuine and is approved by the RBI. It is also important to spend some time on the website/app, as the look and feel of the website/app/social media accounts can also help check the credibility and authenticity of the lender.
Check online reviews: To protect yourself from falling prey to unauthorised lending apps and sharing your personal documents and data with them, it is prudent to go through the app reviews on the play store or app store or even on Quora where you can check the feedback shared by previous/existing borrowers. This way you can be completely sure about the lender you opt for.
Check the fine print before applying for a loan: To protect and secure your data as well documents and to avoid any hidden charges in the future, you must go through the terms and conditions on the website/app carefully. A genuine lender will have the Terms and Conditions, Privacy Policy, etc. clearly listed down on their website/app. Thus, you must ensure to check the fine print before sharing any documents on these platforms.
Be wary of unprofessional customer service: Unprofessional or unresponsive customer service is always an off-putter, but in the case of online loan portals, it is a red flag that may indicate that the website is not trustworthy.
Check if the offer is too good to be true: In this world, there are no free lunches. A borrower should note that anything which looks very good can’t be true.
According to Chopra, up-front payments or advanced payments should be avoided by the borrowers. In addition to this, lenders who do not check your credit history should be avoided.
“You need a decent credit score to be eligible to apply for a loan. Any lender who is offering you credit without checking your credit score or history is fake and will later ask you to compensate for the same,” he said.