Online loan fraud: Beware of illegal apps offering loans - Know ways to avoid being scammed

Online loan fraud: Beware of illegal apps offering loans - Know ways to avoid being scammed
© Provided by DNA

The risk of becoming a victim of online fraud has grown during the Coronavirus-induced lockdowns. According to a new analysis by the Reserve Bank of India, approximately 1,100 apps providing loans virtually are active across various digital platforms in India. Shockingly, over 600 of these smartphone apps in India were illegal, and they were spread over more than 80 application stores.

A central bank working group has proposed laws that would require these digital financing apps to be verified in order to prevent cybercrimes. The committee was founded in order to respond to allegations of online loan scam, including harassment and unfair collection techniques by various virtually managed apps. In the realm of online lending, scams exist, but they can be prevented, provided certain rules are implemented.

Lenders who do not abide by the RBI’s KYC criteria should be immediately treated as perpetrators. To verify that there are no issues with the debt repayment, one should first evaluate the borrower’s reliability. A nodal organization should be established to assess balance sheet lenders’ and LSPs’ technological capabilities. “It will also keep a public register of the verified apps on its website,” the RBI said in its analysis.

Some ways to prevent online fraud

Fraudsters typically have a web-page, in parallel to genuine online loan applications that follow all RBI-mandated rules.

  • Apps with a lot of prepayment fees, processing fees, or pre-closure fees must be avoided.
  • Avoid using non-verified online lending apps that ask for confidential details like bank account information, credit and debit card PINs, or addresses.
  • You should read the app’s ratings in the app store before making a decision.
  • Check to verify if indeed the app is connected with a bank or an RBI-registered non-banking financial company (NBFC).
  • Before selecting the ‘Proceed’ option, make sure you read and understand the important details.
  • Review the terms before coming to a decision.
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