According to a recent survey by Way2News, India’s largest vernacular news app, 43% of respondents have received calls from phone marketers asking them to apply for a loan through an app for the past two years. 70% of people were aware that these apps attract high interest rates and still opted for them in times of need.
51% said that they or someone in their family or friends have availed of such a loan. 67% of those surveyed have been harassed or know of friends and family who have been by loan sharks. Despite facing harassment from loan sharks, 79% of respondents did not know where to complain.
In Andhra Pradesh and Telangana, a survey was conducted last week among Telugu-speaking users of the Way2News app. At least 2,00,000 citizens from the two Telugu states took the survey. 65% of men and 35% of women shared their responses, with the majority (44%) in the 21-30 age group. The majority of respondents were from Mahbubnagar (3171), followed by East Godavari (3047) and Nalgonda (2954).
We asked several questions about loan apps to understand the perception of people in the state toward these micro-credit loan apps.
The apps entice users by giving loans quickly and conveniently with high-interest rates and processing fees. When someone defaults, recovery strategies include contacting and texting others on the borrower’s contact list, morphing images, and more.
According to the police, the fraudsters hack into the app user’s phones and take their data, including bank information, emails, and images. They then start tormenting the user by sending their friends, coworkers, and family the user’s modified pictures.
The Hyderabad Police also issued red corner notices against a few Chinese citizens for their connections with these illicit online loan app operations. Google India removed many of these lending apps from their Play Store. The Reserve Bank of India (RBI) has also established a working group to investigate the operations of regulated and unregulated businesses in digital lending.
In the banking and lending sector, the digital revolution of the twenty-first century has made elements of banking simpler. Particularly during the lockdowns brought on by Covid-19, digital loans were easier to access. However, there are hazards associated with borrowing via mobile and online lending companies, and people should be mindful of this when taking a loan from these online apps.
How do digital loan lending apps work
Smartphone apps get used for digital lending. Installing one of these applications on your phone by providing information, uploading requested papers, and completing the verification process is required to obtain the loan. Once all the steps have been completed, the lender app analyses the application based on the provided information and assesses the risk and interest rates. The loan is approved in minutes and typically deposited into the borrower’s bank account. Unfortunately, this ease of lending has also drawn some unscrupulous apps that do not follow the guidelines established by the RBI and the Digital Lenders Association of India (DLAI).
Establish platform’s genuineness
Any platform for online lending is a bank or a Non-Banking Financial Company (NBFC), or it may be a business that collaborates with a bank or an NBFC. The sole criterion for review is whether the app you’re borrowing from is an NBFC. The only entities authorised to offer digital loans are digital lending platforms registered with the central bank or state-level authorities. You should always check to see if your digital lender has registered with the central bank and other government agencies that regulate money lending before taking a chance on digital loans. Simply back off if there are no indications of it.
Do not accept when KYC not needed
You should not proceed with a digital lending app if it does not properly investigate a borrower’s background before giving a loan. People frequently mistakenly believe that customer-friendly applications are those that do not require the user to complete a KYC. Such programmes have evolved into the ideal trap for those looking for easily lent money. Background checks, often known as KYCs, are essential in digital lending. It is to prevent identity theft and financial crime; to verify customers. Before users can apply for any loan, all legitimate digital lending applications require them to go through a KYC process.
Be mindful of hidden charges
The most frequent traps that untrustworthy loan applications put upon their customers are the late submission charges. If they cannot make timely payments, they end up paying an additional 2% to 3% of their EMI amount.
Thoroughly read and review terms and conditions
If you carefully study the terms and conditions, you should be able to identify anything suspicious about the loan or the lending platform. Because the terms and conditions page is lengthy, many don’t read it carefully and wind up agreeing to something that can lead to exploitation. Additionally, since they had agreed to those terms, they will no longer be able to take legal action.
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