Raising Small Loans on Lending Apps: A Cakewalk or a Risky Endeavor?
There is no denying the fact that raising small loans on a lending app is convenient and hassle-free. With just a few taps on your smartphone, you can have the money you need in your account within hours. However, the growing number of complaints and reports about fraudulent lending apps has raised concerns about their credibility and the security of borrowers’ financial data.
The Dark Side of Lending Apps: Complaints and Fake Apps
According to data shared by the Finance Ministry in Lok Sabha, there were 1,062 complaints against lending apps in fiscal year 2023. These complaints shed light on the dubious practices of some lending apps, which have been accused of misusing borrowers’ financial data and privacy to deceive them. The severity of the situation led Google to remove 134 fake loan apps from its Play Store in just one week in September 2023.
Interestingly, some of these fake loan apps had a significant number of downloads, with 12 of them surpassing one lakh downloads and 14 having over 50,000 downloads. These numbers raise questions about the sheer number of people who are falling victim to these fraudulent apps.
Why Do People Resort to Lending Apps Instead of Banks?
One might wonder why someone would choose to borrow from a lending app instead of approaching a traditional bank or NBFC (Non-Banking Financial Company). Neeraj Gupta, Managing Director of Branch International, sheds light on this phenomenon. He explains that borrowers who have been declined a loan by banks often turn to these apps. Additionally, there may also be some common customers who prefer the convenience and speed of these apps.
Gupta also points out that the average profile of a lending app user is considered riskier, which is why fintech apps charge higher interest rates. These apps offer faster loan approval and disbursal, as well as the ability to provide cash to meet immediate financial needs. However, he emphasizes that the regulations in India are in place and fintech players need to comply with them.
How to Determine the Credibility of a Lending App?
Considering the risks associated with lending apps, it is crucial to assess their credibility before seeking a loan. Here are some important factors to consider:
- Affiliation to NBFC: Check which NBFC the app belongs to. The Reserve Bank of India (RBI) provides a list of registered NBFCs on its website.
- Verify Claims: Cross-verify the claims made by the app on its website. Don’t trust an app simply because it claims to be associated with a famous NBFC.
- Downloads and Reviews: Take a look at the number of downloads and user reviews of the app. While a high number of downloads and positive reviews reflect positively on the app, it is important to remember that this alone does not guarantee credibility.
- Beware of Similar Names: Some fake loan apps deliberately use names similar to reputable brands to mislead borrowers. Stay vigilant and double-check the app’s authenticity.
- Customer Care Mechanism: A credible lending app should have a proper customer care mechanism in place. Ensure that the app provides customer support information before proceeding with the KYC (Know Your Customer) process.
As the number of complaints against lending apps continues to rise, it is essential for borrowers to exercise caution and thoroughly assess the credibility of these apps before entering into any financial transactions. Your financial data and privacy are at stake, so it’s better to be safe than sorry.
Analyst comment
Negative news: The article highlights the growing concerns and complaints about fraudulent lending apps, raising questions about their credibility and the security of borrowers’ financial data.
As an analyst, the market for lending apps is likely to face increased scrutiny and regulation as a result of the growing number of complaints. This could lead to a decline in the popularity and trust in lending apps, potentially affecting their user numbers and profitability.
