There are so many mobile apps offering instant personal loans with minimal documentation. Is it safe to avail these loans? How do I know which ones are genuine? What precautions should I take before applying?
-Name withheld on request
The ease and convenience of taking a loan through a mobile app can be tempting, especially when financial needs are urgent. However, the rise in digital lending has also brought with it several risks that consumers must be aware of.
The first and most important step is to ensure that the app you are using is linked to a legitimate lender. Check if the lender behind the app is registered with the Reserve Bank of India (RBI) as a non-banking financial company (NBFC) or is a bank-regulated entity. RBI has also published a list of authorised digital lenders and loan service providers on its website. Make sure the app is either directly operated by or partnered with one of these entities.
Avoid apps that are not available on official app stores or those that ask you to download APK files or install from unknown sources. These often bypass regulatory scrutiny and can put your data and financial security at risk.
Before you proceed, always read the app reviews and ratings. Look beyond just the number of downloads—check whether borrowers have flagged any issues like harassment, hidden charges, or misuse of personal data. Also, ensure the app has a clear privacy policy and does not seek unnecessary permissions such as access to your contacts, photos, or location unless strictly required.
One red flag is the promise of extremely fast disbursals with little to no paperwork and very low interest rates. Responsible lenders will always run proper KYC checks, evaluate your repayment ability, and be transparent about fees, charges, and penalties.
Also, be wary of the repayment terms. Some illegal apps lure customers into short-term loans with extremely high interest rates, often disguised as processing fees or late charges. This can lead to a debt trap. Read the loan agreement carefully—understand the total cost of the loan, tenure, interest rate, and any prepayment or foreclosure clauses.
Another important point to consider is customer service. A genuine lender will have a proper grievance redressal mechanism, clearly mentioned contact details, and an escalation matrix. If an app does not offer a helpline or hides behind anonymous email addresses, that’s a cause for concern.
If at any point you feel pressured, harassed, or uncomfortable with the way a lender or app is behaving, report it to the RBI’s Sachet portal or lodge a complaint with the cybercrime cell. Many fraudulent lenders rely on intimidation tactics, including accessing personal contacts or threatening defamation. Such behavior is illegal and should be reported immediately.
In conclusion, while mobile apps can make credit more accessible, you must exercise the same level of caution you would with any financial product. Choose apps linked to RBI-regulated entities, verify their credentials, read the fine print, and never compromise on data privacy. A little diligence at the beginning can save you from a lot of trouble later.
Harish Venugopal, chief risk officer at HDB Financial Services