Personal loan frauds through mobile loan apps have become common nowadays. And, in most cases, it's the user's lack of awareness and knowledge about such mobile loan apps for the rise of such cases.
However, following precautions while dealing with any mobile loan app can help you to avoid such frauds and save yourself nightmarish situations.
In this blog, we will understand a few ways to verify a mobile loan app and the lender before taking an instant personal loan.
5 Ways to Verify your Lender Before Taking a Loan
- Know Your Lender: Just like your lender performs know your customer (KYC) verification before disbursing a loan, you also need to perform your own lender safety check.
Any lender operating in India must be registered with the Reserve Bank of India (RBI) and the Ministry of Finance, Govt. of India. You need to check the registration number of the lender and verify it. In most cases, you will find notices and circulars issued by RBI containing all the information about the lender.
Also, each lender has to follow the rules, guidelines and code of conduct issued by RBI to operate within the country. Any lender or financial institution that doesn’t provide any such information is unauthorized to conduct business in India.
- Check the Lender’s Website: The lender should have an updated website containing all the relevant information including company identification number (CIN), certificate of registration (CoR), key management personnel, and information related to all products and services.
Most illegal lenders, which operate through mobile loan apps cannot provide any such information or tend to have a website. Even if they have a website, critical security functions like HTTPS will be missing from its website URL. These are the red flags for you to notice and you should stop dealing with such apps immediately.
- Check out the Loan Approval Process: To attract users, unauthorized mobile loan apps claim to skip crucial steps of loan approval.
For example, beware of apps claiming “quick personal loan approval without a PAN Card or income proof”. All such hard to believe promises and not so transparent loan approval processes by any mobile loan app should be a red flag for you.
- Check Out the Lender’s Physical Address: Lenders operating in India must have a physical office in India and should be staffed with local personnel. You should always check the physical address of the lender, which city it is based on, the email address, phone number of the lender.
Also, verify the information on the website of the Ministry of Corporate Affairs and Reserve Bank of India.
- Check out the Lender’s Online Review: If you are satisfied with the information provided by the lender and feel that the lender is genuine, then STOP. Your last safety check should be the review and ratings given by existing customers about the mobile loan app.
You should go through the reviews given by mobile loan app users on the app store or play store. Simultaneously, also check for reviews on the internet, which will help you to make a decision.
Things to Consider Before Taking a Personal Loan
You should never take a personal loan blindly, even if you have a good working relationship with the lender. Here are the five things you should do before taking a personal loan.
- Compare the personal loan interest rates with other different lenders.
- Check your loan eligibility using the personal loan eligibility calculator.
- Check all the additional costs involved like processing fees and penalties.
- Check your EMIs using the personal loan EMI calculator.
- Evaluate the terms and conditions of the loan and repayment plan thoroughly.
Personal loans are pretty straightforward types of loan products and don’t have stringent paperwork and approval processes. But you should be mindful of the terms of the lender and make timely EMI payments, otherwise, it will have a very negative impact on your creditworthiness. It is also strongly advised that you read and understand the terms of your loan such as the interest rate, monthly EMI, tenure, fees and charges, etc. on the loan agreement before signing the document.
In today’s time, technology has enabled easier access to credit and the banking system from the comfort of our homes. But, at the same time, people with the wrong intention try to defraud people of their hard money using illegal mobile loan apps.
But, your small attention and awareness to the details of the working of such illegal mobile loan apps can prevent you from falling into such traps. You need to be a little watchful and follow the best safety practices, whenever you are dealing with any lender, whether or not, you have a business relationship.
Never go after personal loan offers and schemes from unauthorized lenders that are too good to be true.