Google India recently reviewed several personal loan apps on its Play Store and removed those that violated its user safety policies. Of late, multiple apps that do not seem to be governed by any regulations, have cropped up online. These apps require basic information from customers and issue loans in a jiffy.
With these loan apps, Suman Gandham, Founder of Finin says, defaulters are forced to pay a fixed late fee per day aside from interest. These companies are known to leak data and turn towards abusive confrontations to retrieve the money lent, leading to data breach and abuse.
"The modus operandi of such companies is to push people into a vicious cycle of debt, interest payments and late fees to make money. This is one of the most important reasons why one needs to be extremely wary of where and whom they take a loan from," Gandham opines.
On the other hand, legitimate lenders conduct a standard KYC, involving PAN, Aadhar, and mobile number verification, and the data is secured with no chance of extraction of any other personal detail.
"As per the RBI, the customer needs to sign a loan agreement form with the registered NBFC/bank and do a credit bureau check as well. All these critical steps are missed out by the fraud companies. This leads to aggressive collections calls and these payday lending companies end up charging very heavy penalties for people who aren’t able to pay back the loan amount they have taken. Even a day’s delay in repayment leads to the lender sending enforcers to aggressively extract the amount," Anuj Kacker, Co-Founder, MoneyTap explains.
RBI has recognized this and is intently working on removing any trace of such lending practices in India.
Here are key things to consider before taking a quick/easy loan from loan apps:
According to Satyam Kumar, CEO& Co-Founder, LoanTap, users should verify the credentials of loan apps and check whether they have RBI registered NBFCs or genuine partners for disbursing the loans.
“Differentiating between genuine lenders and illegal apps is crucial so as to fulfill needs without falling prey to any fraudulent activities,” Kumar suggests.
Know the lender
Even as platforms, regulators and law enforcement work towards removing illegal lending apps, Anil Pinapala, Founder & CEO at Vivifi India advises potential borrowers to protect themselves by following best practices to 'know the lender'.
“This means that customers should go to the lender's website and ensure that they are a properly incorporated Indian entity with a valid certificate of registration before deciding to download the app,” Pinapala suggests.
Further, customers should verify if the app is asking for access to sensitive data like contact phone book which has been the root of a lot of coercive collection attempts and stop downloading any such apps.
“Once a customer chooses their lender, they should ensure they know the true cost of loan before signing the agreement to know if there are any hidden charges and fees. So, customers should value legality, transparency and full disclosure than focusing on the lure of quick approval,” he adds.
Additionally, Shubhradeep Nandi, Founder of Pichain Labs suggests borrowers to do some prior research about the company or its promoters.
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(Edited by : Jerome)
First Published: IST