10 ways to protect yourself from illegal digital lending apps
With the rise of digital fraud, borrowers often fall victim to predatory lending practices. Unavailability of funds on desirable terms, offers that are too good to be true, and lack of public awareness about finance and borrowing are the main reasons for trapping unsuspecting consumers.
Recently, a plethora of fraudulent digital lending apps have emerged, and one of the most vulnerable groups are low-income groups. Many individuals in this category lack awareness about the risks associated with illegal digital lending apps.
Illegal lending apps often use attractive tactics that promise short-term loans at very low interest rates to lure investors. These attractive offers can deceive borrowers and draw them into a web of financial hardship. Borrowers end up with less than they already had, trapped in a vicious cycle of hidden charges, high interest rates, and even fraudulent transactions.
So how can you identify these problematic apps?
Paying attention to the following signs will help you identify these apps.
In the absence of regulatory approval: Legitimate lending apps will prominently display regulatory approvals and licenses. These approvals and licenses give borrowers peace of mind that their lending app operates within legal limits and complies with industry standards.
High and opaque costs: Be wary of apps with exorbitant interest rates or unclear terms and conditions. If a rate seems too good to be true, it probably isn’t legitimate.
Unsolicited links: Since these programs are not listed in app stores, malicious links sent via SMS or email usually direct you to these programs.
Invasion of privacy: Apps that request unnecessary permissions to access personal data should raise concerns. Legal lenders will only ask for the information and permissions necessary to process your loan. These apps often lack response mechanisms such as customer service numbers or valid registered office addresses. Although there are risks with illegal apps, legal and well-organized sources of digital lending are available. Here’s how to identify them:
Check out our reviews and feedback: Research your app’s reputation by reading online customer reviews and feedback on integrated sites and Google Search. Positive experiences from other borrowers are a good sign.
Financial literacy: Increase your financial literacy to better understand the risks and costs associated with borrowing. Knowledgeable borrowers are less likely to fall into the trap.
View details: Please read and understand the app’s terms of use carefully. Legitimate lending apps provide clear and concise terms.
contact address: Make sure the app offers reliable customer support with clear contact information, including a physical address. Genuine financial companies value communication with their customers.
Comparison: To verify the legitimacy of these apps, users can also compare them with other legitimate apps.
Antivirus software: It is important to use reliable antivirus and antimalware software on your device to detect and prevent the installation of potentially harmful apps.
Protecting yourself from illegal digital lending apps is especially important for vulnerable low-income groups. Being aware of the risks, recognizing the red flags, and seeking out organized financing sources can help you avoid financial pitfalls and ensure a safe and responsible financing experience. Remember that knowledge and informed decision-making are the most powerful tools against predatory lending practices in the digital age.
The author is MD & CEO of Aadhar Housing Finance.