Here’s how to identify unauthorised lending apps to safeguard your finances

The ease of accessing credit via digital lending platforms can be highly advantageous in the digital era. Nonetheless, it brings forth its own set of dangers, particularly concerning potentially illicit apps. These apps pose risks to users, including privacy breaches, harassment, and financial exploitation. To protect oneself from such risks, maintaining vigilance and awareness is paramount.

Sidharth Vishwanathan, Chief Risk Officer, KreditBee, said, “Recent incidents have underscored the persistent threat posed by unlawful digital lending applications. These apps often target individuals facing financial difficulties, luring them with promises of swift loans at favourable interest rates. However, they frequently engage in predatory practices, such as imposing excessive interest rates, undisclosed charges, and unethical debt collection methods such as image morphing and circulating, etc.”

Here’s a checklist to identify a fake lender and ways to protect oneself from fraud:

Unsolicited links: It’s essential to exercise caution when receiving unsolicited links, especially those promising financial assistance or services. “Avoid clicking on suspicious links and refrain from downloading apps from unknown sources. Instead, rely on reputable app stores and conduct thorough research before installing any lending app to safeguard your personal information and finances,” said Vishwanathan.

RBI license: To verify the legitimacy of a lender, borrowers should visit the website and confirm that the app is associated with a bona fide lender registered with the Reserve Bank of India (RBI) or operates in partnership with a bank/NBFC registered with the RBI. Illegal apps don’t explicitly mention the legal entity through which they are lending.

Clear and transparent terms: A legitimate lender will offer transparent and easily understandable terms and conditions outlining the loan application process, interest rates, repayment terms, and additional fees. Exercise caution with lenders that employ unclear or ambiguous language or impose hidden fees.

Grievance redressal: Authorised lending applications typically feature a grievance redressal mechanism and must comply with various regulatory directives regarding KYC (Know Your Customer) procedures and collection practices, all aimed at safeguarding the interests of borrowers.

Beware of upfront fees: Be wary of lending apps that request upfront fees or charges before approving a loan. “Legitimate lenders typically deduct processing fees from the loan amount or include them in the repayment plan rather than requiring upfront payment,” said Vishwanathan.

By following these steps and remaining vigilant, you can better protect yourself from unauthorised lending apps and safeguard your finances.