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Taking loans from fintech? Here's how to be aware of frauds

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Taking loans from fintech? Here's how to be aware of frauds

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Fintech frauds: Here are some aspects that a lender should be aware of before relying on fintechs for loans.

Taking loans from fintech? Here's how to be aware of frauds

Fintech, a portmanteau of finance and technology, has revolutionised the lending and payment landscape in the past few years in India. The industry has witnessed phenomenal growth in terms of companies engaged in lending, which have made credit access easy to borrowers. Fraught with opportunities, these lending companies have equally attracted the attention of investors and fraudsters.

While digital lending has the potential of making access to financial products fair, efficient and far more inclusive than traditional banks, customers should be aware of the downside risks that are interwoven with such endeavours. A basic understanding of digital loans and the process of lending will help borrowers stay safe from frauds.

Here are some aspects that a lender should be aware of before relying on fintechs for loans:

  • All lenders are concerned about the borrower’s credit report and check details of their payment history. Fintech lenders use artificial intelligence models to check the credit score of the borrower. The process may be fast, but is always done to know if the borrower is conscientious about repaying a loan. Operators of loan scams are more likely to not check the details of the borrower.
  • Fraud lenders focus on high-risk debtors who are desperately looking for quick loans.
  • Scamming lenders generally pressurises the borrowers with deadlines to apply for a loan.
  • All lenders implement know-your-customer (KYC) norms and borrowers should be cautious of fintechs that do not follow KYC rules.
  • Borrowers should always avoid scanning a barcode to receive money from a lender.
  • Dubious lenders do not reveal all terms of the loan, including the repayment amount, interest, late fees and duration.
  • All lenders share a loan agreement with borrowers incorporating all detailed terms and conditions. If a lender fails to provide such a document, the borrower should not take the loan.
  • Borrowers should conduct due diligence of prospective lenders before applying for a loan. Genuine lenders have websites which should be checked before downloading any app.
  • If the borrower is taking loans via an app, it is always advisable to examine the loan app carefully. They should also read the app’s privacy policy which is published on the app stores.
  • Fraudulent loan operators sometimes avoid giving the physical address of the company to ensure they are not easily traced.
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