Instant personal loan apps: 6 ways to distinguish real from fake | Mint

Instant loan apps have transformed the lending scenario by providing quick and easy access to finances with just a few clicks on your phone. However, as such apps gain popularity in the financial landscape, the scams associated with them have risen as well.

1. Registered and authorised by RBI

The Reserve Bank of India (RBI) regulates all formal lending activities in India. It is mandatory for every instant loan app to register with the RBI. This step is essential to ensure that such platforms adhere to rules and regulations mandated by the central bank to protect borrowers from fraud. Having RBI’s nod would mean that the app follows every guideline issued in the interest of the borrower. A genuine instant loan app will be registered with the RBI, following all the norms issued by RBI. The central bank may penalise lenders that do not follow these norms.

2. Data security

Every instant app that you download will request specific data from your phone. Most genuine apps would mention the reason for every information they need access to. Be careful of the apps that ask for unnecessary information that can breach your data privacy.

3. Contact details

Always check the contact details of the instant personal loan you plan to take out. Also, verify the website and address of the app provider. A genuine loan app will be transparent by providing legitimate contact details and a verifiable address. Fraudulent loan apps will lack genuine contact information and a physical presence.

4. Online reviews

Before downloading any instant loan app, check the reviews and ratings on app stores. Apps with positive reviews and high ratings reflect their legitimacy, whereas negative reviews and low ratings show that the app is not genuine. This will help distinguish between authentic and fake loan apps. However, reviews and ratings might not be the best metric to assess the genuineness of a loan app, as some reviews can be fake as well.

5. Seek a financial advisor

The best way to know if an instant loan app is genuine is to contact a financial advisor. These experts can help differentiate between fraudulent and legitimate apps on the basis of their knowledge and experience.

6. Terms and conditions

It is essential to read the terms and conditions to avoid falling for loan scams. A genuine instant loan will be transparent with the terms and conditions. It will provide necessary details such as interest rates, fees, repayment details, etc.

 If the terms and conditions are unclear about such details, it could be a potential scam. Legitimate loan apps will also mention legal details, highlighting necessary disclosures and mentioning the rights and obligations of lender and borrower. If these disclosures are missing or incomplete, proceed with caution.

Few signs of fraudulent instant loan apps

Lack of KYC

Know Your Customer or KYC process is used by lenders to verify the identity of their customers. This process is mandated by the RBI. If your loan app does seek KYC, it may be a scam.

Loan agreement

Fraudulent instant loan apps will provide a loan agreement if you wish to take a loan. A loan agreement is a formal contract between the lender and a borrower that provides legal protection in case any party violates the terms.

Advance fees

Some instant loan apps may ask for advance payments to approve your loan. Such apps are potential scams. Do not pay any processing fees to approve your loan.

In conclusion, while instant loan apps have made taking loans easier, they have an equal chance of being a potential scam. Be diligent and careful before applying for a loan. Do not get lured by unrealistic offers some fraudulent apps offer. Try to seek a professional to make informed lending decisions.