Digital Lending Platforms: How to avoid cyber threats, getting debt trapped while taking loans

Getting loans are becoming easier. Gone are the days of getting papers ready before approaching banks to get a loan approved. Now, one may get a small loan sanctioned from a digital lending platform without any paper work and that too with the comfort of doing it from home.

However, the ease of the lending process may result in the borrowers overlooking some crucial terms and conditions, which may spell trouble after taking the loan.

While the positive impact of digital lending may not be undermined, it definitely needs to be more responsible given the multiplicity of digital handshakes with different departments, different vendors and, sometimes, different industries. Also, borrowers need to be more aware and focus on their rights.

Algo360 – a Startup that provides alternative data solutions to minimise risk on the digital lending platform – conducted a simple (statistically not significant) survey of around 100 digital lending app-based borrowers (focused on pay-day loans).

The results (not exhaustive) of the survey were worrisome:

• Almost 80 per cent had taken loans from an aggregator/third party app, and over 90 per cent of them were not aware of the eventual lender
• Less than 5 per cent knew/read/cared about the Terms & Conditions of the loans
• Less than 15 per cent remembered if these apps had access to their call logs/contacts/address book
• More than half the borrowers were comfortable with the idea of taking another loan to pay off an existing overdue loan

With borrower education continuing to be poor, lending apps take full advantage of this ignorance to maximise short term profits.

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Rules for borrowing from lending apps

Do not download off-market lending apps: No “responsible lender” will ask you to download an app that does not comply with Play Store/ App Store guidelines.

Manage app permissions carefully: Opt out, rather than opt in. Most lending apps seek permissions – device information, SMS, call logs, etc. If you are not comfortable with a particular information request, deny access, since many of these permissions are “not mandatory”, and may not affect your immediate credit risk assessment.

Carefully assess your need and repayment capacity: Your failure to repay the loan almost always has consequences—either in the form of poorer credit scores or worse, loan sharks.

Read the lending contract very carefully: This is important to know about the lender, and the terms and conditions along with the disclosures. If something seems a misrepresentation, immediately raise complaints with the lender or with the RBI ombudsman.

Use credible anti-virus: Good anti-virus can monitor information being stolen/ scraped from your device without your consent, and whether the information is transferred unencrypted with a higher risk of hacking/ data theft.

Review your credit bureau report periodically: It shows the various scores and report enquiries made against your profile. When you see activity that you cannot recognise, raise a dispute with the bureau.