Smart Borrowing in the Digital Age: How to Avoid Loan Traps

With the rise of instant loan apps and digital lending platforms, borrowers are enjoying unprecedented convenience. However, this ease of access comes with risks, including hidden fees, unclear terms, and potential data misuse. Here’s how borrowers can ensure safe and transparent borrowing in a tech-driven world.  

 

Key Highlights:  

 

- Verify lender legitimacy. Ensure the platform is regulated by the Reserve Bank of India (RBI) or partnered with a registered bank or non-banking financial company.

Avoid lenders that do not disclose their regulatory status.  

 

- Read the fine print. Before accepting a loan, carefully review interest rates, tenure, processing fees, foreclosure charges, and penalties for late payments. Transparent lenders provide clear terms with no hidden costs.  

 

- Demand a Key Fact Statement. This document should outline the total cost of the loan, repayment schedule, and applicable fees. Reviewing it thoroughly helps borrowers make informed decisions.  

 

- Be cautious with app permissions. Some loan apps request access to personal data such as contacts, call logs, and messages. These permissions are unnecessary for loan processing and could lead to data misuse.  

 

- Strengthen security measures. Activate two-factor authentication, set strong passwords, and use biometric verification where possible to protect financial information.  

 

- Know your grievance redressal options. If issues arise, contact the lender’s grievance officer. If unresolved, escalate complaints to the RBI’s Complaint Management System.  

 

- Avoid multiple short-term loans. Taking multiple loans from different platforms can lead to a debt trap. Borrowers should assess their repayment capacity and ensure EMIs fit within their budget.  

 

- Monitor credit reports. Regularly checking credit reports helps identify unauthorized loans or errors, improving future borrowing terms and reducing rejection risks.  

 

By following these steps, borrowers can navigate digital lending safely and avoid financial pitfalls.  

 

Source: Fortune India