In case you are looking forward to raising a short-term loan, it is quite easy to get tempted by a slew of money lending phone apps.
They tend to woo the young people who are either first time borrowers or have a little chance of raising loan through a legitimate channel i.e., banks or other financial institution.
Among the series of promises and allurements they make, the most common ones include that borrowers don’t need to submit any collateral for raise loan. The fintech lender could also claim that there is no requirement to pledge gold or any movable asset to be able to raise loan.
Needless to say, that the entire process is online and one doesn't need to visit any bank branch or office. You could also be tempted by the claims that you would receive money in your account within a few seconds.
Experts advise that borrowers should be very careful and they must first compare various options before choosing one of them. Also, they should ensure that the lending app is a regulated entity instead of an unauthorised one.
“It is essential for the first-time borrowers to conduct a thorough research on the fintech company. They should check the company's credentials, reviews, and ratings before and ensure that it is an RBI registered company. Even in emergencies, you should never download an app from a lender that isn’t RBI registered. This basic due diligence can save the borrower from a lot of future trouble. If you are looking for a loan online then better to do a market survey of all the options beforehand just to be safe,” says Rajeev Das, CRO at LoanTap and a member of industry body FACE (Fintech Association of Consumer Empowerment).
Gaurav Jalan, CEO and Founder, mPokket says, “First-time borrowers must assess their needs properly before applying for an instant digital loan because these loans typically have higher interest rates between 11 percent and 20 percent, which can lead to high monthly payments. The loans must be obtained to cover immediate financial necessities, not to satisfy personal desires to buy expensive and luxury products.”
“Most importantly, applicants must spend some time doing research to learn about the lenders offering loans and compare various options, which can help in making an informed decision. They must refrain from falling for spam calls and messages,” he adds.
Borrowers should keep in mind the following points to avoid falling into any trap:
1. Make sure that it does not make you accept terms and conditions that enable it to give rights to access all the data of your mobile phone. This is a red flag. This is a ploy to access your contact list, and upon non-payment of an EMI, they would message your contact list and could harass you.
2. The rate of interest should not be exorbitant.
3. Always stick to a entity regulated by RBI for raising loan such as a bank or a NBFC.
4. Even if you approach a fintech firm, it is advisable to approach the ones that are run either by or in collaboration with regulated entities.
5. There are some fintech associations which stick to propriety and high standards. So, it is advisable to ensure that the app is part of a recognised industry association such as FACE.
In conclusion, we can highlight that raising loan is an integral part of personal life now but one should exercise due caution and choose the right lender which does not overcharge and doesn’t impose hidden cost and importantly – falls under the regulator’s ambit.