Financial circumstances of consumers have depreciated as a result of the current Covid -19 crisis. It is estimated that Covid 19 will result in over 10 crore people losing their jobs and small business owners facing a cash crunch. According to a report by Credit Suisse in 2019, adults in India have an average debt of $1,345 (Rs 95,000). So, millions of Indians are downloading instant loan apps to make ends meet. Taking advantage of this, cybercriminals are using new ways to swindle mobile phone and computer users. Compared to last year, financial frauds have increased manifold. It’s been estimated that 500,000 people have been scammed with scammers having made more than Rs 15 crore from these apps since the end of March 2020.
There are no exact figures for the number of Indians borrowing via digital means. However, data from AppsFlyer, an SaaS mobile marketing analytics and attribution platform, showed that India had the highest number of installs for lending apps in the Asia-Pacific region in 2020 so far. The venture capital tracking platform, Traxcn, reportedly estimates that currently in India there are 484 different lending apps – including genuine apps that are listed on Play Store and App Store. More than a hundred apps are offering payday loans, and many of them show more than a million installs.
As these numbers continue to grow, awareness about such loan frauds can help one to prevent falling for them.
Here are 5 signs a lender may be a fraud
1. When the lender isn’t concerned about your payment history
One of the indicators of genuineness is whether a lender wants to check your credit report before lending you money. Reputable lenders make it clear that they’ll need to look at your credit history prior to approving any loans. They need to know whether you have a history of paying bills on time and in full, which offers them some assurance that you’ll be just as conscientious about repaying a loan.
On the other hand, the operators of loan scams aren’t really interested in timely repayment. They tend to do the opposite, seeking high-risk debtors who, in their desperation to get a loan, are more likely not to examine/investigate the loan app carefully.
2. The lender pressures you to act immediately
If a lender pressurises you into applying for a loan by putting up some kind of deadline, do not fall for the urgency plea as you could be dealing with a loan scamster.
3. Inappropriately disclosed fee
If your lender isn’t revealing the comprehensive details of the application, appraisal or credit report fees, turn them down instantly.
4. When the lender’s website isn’t secure
When visiting a lender’s site, always look for: A padlock symbol on any pages where you’re asked to provide personal information. Https:// websites are secure and the site is shielded from identity burglars who steal individual data and sell it to other criminals.
A reliable lender will ensure your data is secure and won’t leave your information exposed on purpose, thereby will protect you from loan scams.
5. The lender has no physical address
Make sure the lender you’re interested in has given a physical office location. If you don’t find any indicator of an authentic physical address, you should stay away from the lender. Many operators of loan scams would rather be invisible so they can avoid legal consequences.
These apps on the pretext of providing credit/loans charge an upfront application fee or membership fee ranging anywhere between Rs 100 and Rs 400. The user is then redirected to other apps to apply. Many of the smaller lending apps don’t even have a website and are not even licensed, therefore, their authentication is impossible.
Therefore, individuals looking for loans should be able to differentiate genuine fintech players from fake ones so that they are able to meet their credit needs without getting scammed.
Individual loan scammers invest a lot of time and effort to make their scams look real so that they gain your trust. Differentiating the fake from the real is difficult, but you must try to spot a legitimate loan company.
Even if you have a below-average credit score, there are plenty of companies that offer legitimate loans. When searching for a good lender, start with these steps:
- Check for contact information. A lender’s phone number, email address and physical address should be readily available on the website, even if it’s an online-only lender.
- Investigate online reviews. Customers posting online will have the best insight into the experience of working with a lender.
- Look at the various professional websites that review various loan apps time to time, it is a good way to find out if a lender is trustworthy.
- Make sure it has a Reserve Bank of India’s (RBI’s) mobile-only Non-Banking Financial Company (NBFC) license which allows them to give you that loan.
(The author is Business Head, Rapid Rupee.)