We are now living in a world of digital arena, and due to the financial inclusion movement from the government and the central banking and regulatory agencies, it’s now quite obvious in Tier 1 and Tier 2 cities around the world to use banking facilities through their phones and other digital devices.
Within this whole financial landscape, it’s quite usual that banks and other NBFCs’ lending processes have also shifted online. The startups in the country are now getting the nod from the regulatory bodies to bring more people into digital finance so that it can help create and map the ledger of all the transactions.
However, among all these developments, there is a rise in loan app scams that practice predatory lending, which can be a source of harassment and trouble for the borrowers. In this blog, we will learn in detail how these predatory lending apps operate and how to protect ourselves from this type of scam.
The Allure of Instantaneous Personal Loan
We all face certain times in our lives when we go through a series of financial crunch, and to come out from that step, we tend to look for ways through which we can get some personal assistance.
Rather than consulting with a legitimate loan agent, we find the offer we see on online ads fares better. These shady apps claim that they can provide financial assistance with minimum details and can provide the required funds to the person instantaneously.
Did you find something shady? It’s better to look into the fine lines where the app claims to provide the loan with minimum financial detail. Financial institutions have a totally different practice, as they yearn to know more about their borrower and whom they are lending to. This is the first red flag that needs to alert the borrower.
They play on people’s needs, and individuals who genuinely need money prefer to get the amount with minimum hassle and are prone to applying for loans from these companies and apps.
What Are the Risks of Taking Loans From an Unauthorized Lender
Many loan apps are permanently banned from the RBI’s regulatory norms, but they continue their shady operations from a different location and play by their rules. These can range from exorbitant interest rates on loans to certain clauses that can pose a threat to your financial security and later create problems within the tenure.
The following risks are faced by people who take out loans from these unauthorized apps.
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Leakage of Personal Information
The first and foremost threat a person faces is the leakage of information, and through that, one can put their critical information at risk. These apps or companies can get your name, email address, physical address, and other necessary details without your consent and keep them in their database.
Certain apps ask for separate permission for download, and through that, they can monitor your phone usage, leak that information, and sell it to other companies.
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Increase in Spam Calls
There will be a sharp increase in spam calls, and people need to put a call blocker in place so that they can do their work without being interrupted.
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Financial Fraud and Opacity Within the Process
These shady loan apps maintain an opacity, and they thrive due to this structure. For a person, it’s better to stay away from these companies and avoid them giving you your number.
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Compounding Interest Rate
Sometimes written minutely within the loan terms, these companies charge interest at a compounding rate and thus make the person fall into a debt trap. Therefore, when taking out a loan for a big purchase like a house, it’s better to consult with a home loan agent who can steer you clearly through this mess and help you get a better deal.
How To Protect Yourself from These Scams
Several ways can help a person protect themselves from this financial peril, which many people have already faced due to loan apps. Here are some of them listed and necessary things that a person can do to ensure financial security.
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Check the source of the app
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Register a complaint to the authority
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Don’t grant the permissions to these apps
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Search for the reviews on the internet
These are some of the main aspects of ensuring your financial and personal data is protected, and you don’t fall into the traps of these loan apps.