Taking A Digital Loan? How To Ensure The Lender Is Genuine

In today's digital age, online lending platforms have become increasingly popular, with many young borrowers seeking financial assistance. A report released last month by the self-regulatory body for fintech lenders, Fintech Association for Consumer Empowerment (FACE), and credit information company Equifax revealed that borrowers under 40 make up 80 per cent of the digital lending customer base. The report also said that the number of borrowers aged 25 and less increased to 16 per cent from 13 per cent last year. The amount disbursed to this age group also surged by over 50 per cent in FY23 compared to FY22.

With this surge in digital lending, you must choose a trustworthy digital lender. "India, with its growing digital economy, has witnessed a surge in online lending platforms offering myriad financial services. While this presents borrowers with a wide range of options, it also exposes them to potential risks associated with scams and fraudulent activities," says Vivek Veda, Co-founder and CFO at KreditBee. Hence, borrowers must verify the digital lender's registration and licensing with relevant regulatory bodies. It's also vital to assess the lender's reputation, ensure robust website security and data protection, and research various lenders, Veda further said.

Steps to check Digital Lender is Genuine

To help borrowers identify genuine digital lenders, here are some essential steps to consider:

Regulatory Compliance: "In India, lenders should be registered with the Reserve Bank of India (RBI) as non-banking financial companies (NBFCs) or other recognised entities," says Veda. One can confirm the lender's registration status by visiting the RBI website or contacting their helpline. Further, it should be ensured that the lender's website displays essential details like the Company Identification Number (CIN) and Certificate of Registration (CoR) with the RBI.

Goodwill and Customer Handling: Research the digital lender's reputation and look for customer reviews and feedback on online forums, social media platforms, and review websites. Positive and Negative reviews from previous borrowers can provide a balanced understanding of the lender's services. Be cautious of apps that guarantee approvals without considering customers' creditworthiness. Also, if their representatives pressure you into making decisions hastily be extra careful. Genuine lenders often list a grievance redressal process on their app and provide contact details for the grievance redressal manager. Ensure the lender has a physical address for authenticity. Contact their customer support to ensure prompt and professional responses to customer inquiries.

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Secure Website and Data Protection: "Check if the digital lender's website or mobile app has appropriate security measures in place. Look for indicators like "https://" in the website URL, which signifies a secure connection, and a lock icon indicating encryption," Vivek Veda says. Review their privacy policy to understand how they handle and protect your personal and financial information. Beware of unlawful digital loan applications that may seek excessive app permissions to acquire user data fraudulently.

"The borrower shall be provided with an option to give or deny consent for use of specific data, restrict disclosure to third parties, data retention, revoke consent already granted to collect personal data, and if required, make the app delete/ forget the data," RBI's digital lending guidelines say. Protect your privacy by restricting unnecessary access to your phone's contacts, location, and photos.

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Transparent Information: Genuine digital lenders provide details transparently on loan products, terms, interest rates, fees, repayment schedules, etc. Ensure the lender's website or mobile app presents information in an easy-to-understand manner. "In case of floating rate loans, Annual Percentage Rate (APR) may be disclosed at the time of origination based on the prevailing rate as per the format of KFS. However, as and when the floating rate changes, only the revised APR may be disclosed to the customer via SMS/ e-mail each time the revised APR becomes applicable," RBI says.

Following these steps, borrowers can confidently identify genuine digital lenders in India, ensuring a safe and secure borrowing experience in the digital lending landscape. But research, verify, and compare interest rates of multiple lenders to make an informed decision based on your repaying potential.