Borrowing money through digital apps
Borrowing money has never been easier thanks to the rise of fintech ecosystem. Digital lending platforms or instant loan apps that allow individuals to borrow money quickly and easily are among the byproducts of the confluence of finance and technology.
Jul 2023
3 mins read
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Digital lending is growing increasingly popular, particularly in India, due to its quick lending process. However, engagement of third parties, mis-selling, data privacy violations, unfair business practices, charging exorbitant interest rates, and unethical recovery practices remain a concern.
Digital Privacy
India's thriving fintech ecosystem has enabled a multitude of companies to sprout and offer a wide range of credit services. Consumers should be cautious about unregulated digital lenders engaging in questionable business practices and excessive engagement of third parties, which are a growing threat to digital privacy as countless people are falling victim to unfair interest rates.
Evaluate the charges
It is crucial to evaluate transaction charges before borrowing money through digital apps by carefully reviewing the fees, such as the annual percentage rate or the cost of borrowing money, interest rate per annum, application fee, processing costs, and late payment penalties. To learn more, the borrower should carefully read the key fact statement, which states that banks and Non-Banking Financial Companies (NBFCs) that provide loans through digital lending service providers (i.e., in collaboration with fintech apps) or digital loan apps. It provides guidelines to the borrower before the loan is sanctioned, among other guidelines.
Read the fine print
Reviewing the guidelines and key fact statement is crucial for digital borrowing. For E.g. Reserve Bank of India (RBI) guidelines state that the loan should be disbursed directly into the bank account of a borrower. No pass-through account or pool account of any third party should be involved. Therefore, for better transparency, if a digital lending app is offering a loan to you in partnership with a bank, then the bank will disburse the loan to your bank account rather than through an app.
If you’re considering borrowing money online, knowing the pros and cons is crucial. But if you’re looking for a higher amount, considering a bank loan could be a feasible option.
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PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 266 7446
Email: care@pgimindia.co.in
This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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