When you face an urgent need for money, it is a common practice to approach a bank or an NBFC for the same. Perhaps not anymore! There are quite a few fintech apps that also provide loans to borrowers.
And most of them usually disburse personal loans in a very short period, sometimes 10 minutes. However, it is important for consumers to be careful and opt only for the apps that are credible and safe.
We spoke to a few experts to find out how consumers can decide which apps to choose and which not.
Here is a checklist they provided:
I. Legitimacy: First of all, you should check whether the platform is legitimate or not, which means it should be an RBI-registered bank or a regulated NBFC.
“Always ensure that the digital platform is linked to an RBI-registered bank or regulated NBFC. Unfortunately, unauthorised loan apps are common, and they can put borrowers at serious risk,” says Kundan Shahi, Founder, Zavo.
Rohit Garg, CEO of Olyv, echoes the same sentiments when he says, “Consumers should first verify whether the platform partners with RBI-registered NBFCs or banks, as this ensures regulatory oversight and responsible lending practices.”
II. Check reviews: Another precautionary measure one can take is to check the reviews on the app, which instills a sense of confidence.
“One can check the credibility of the platform by going through reviews on app stores. One must also assess the company’s background and ensure it has reputed institutional investors that can help establish trust,” says Aalesh Avlani, Co-founder, Credit Wise Capital.
III. Read between the lines: Borrowers must be aware of all the expenses that they may have to incur, including the processing charge and also the charges that kick in when EMI is delayed. These could include penalties and late fee charges.
“Instant loans often come with high interest rates, hidden charges, or steep penalties. Don’t just look at the EMI: check the APR, processing fees, and repayment terms. Read the agreement carefully so you know exactly what you’re signing up for,” adds Kundan Shahi of Zavo.
IV. Protection of data: Borrowers should also make sure that they do not lose their personal data since some apps demand access to photos, contacts, and other data, thus invading into privacy.
“Many apps ask for permissions to access sensitive personal data, such as contacts or SMS data etc. Such practices may jeopardize privacy and ought to set all red flags,” adds Avlani of Credit Wise.
V. Responsible borrowing: Another important thing to remember is that one should borrow only what one can easily repay. “One should borrow responsibly. Just because a loan is available at the tap of a button doesn’t mean it suits your financial reality,” adds Kundan Shahi.
“True financial empowerment lies in responsible borrowing, where access to credit comes with trust and fairness,” says Bhavin Patel, Founder and CEO, LenDenClub.