Personal Loan: 3 mistakes people make while borrowing money through a fintech platform

If you are in urgent need of money and do not have any security to give as collateral then the sole feasible option that you can opt for is to take a personal loan.

For those who are not aware, a personal loan is an unsecured loan that banks and other financial institutions give to borrowers to help them meet their financial needs. These financial requirements could range from paying for a wedding, going on a vacation or to pay for an unanticipated emergency.

The highly recommended option for a personal loan applicant is to approach a bank. And in case you fail to raise the loan from a lender, the next best alternative is to knock at a fintech’s door, albeit not literally.

There are quite a few financial technology firms which give personal loans to borrowers such as KreditBee, Lendingkart, Paytm, Money Tap and Groww.

Before you jump the gun, and start borrowing money from a fintech platform, be careful about the three key factors.

3 mistakes to avoid while borrowing money on a fintech platform:

I. Unregistered with RBI: The banking regulator has uploaded a list of registered non-banking financial corporations. You can access the list here.

It is recommended that you seek personal loan only from a registered NBFC or a fintech platform which has partnered with a registered NBFC.

II. Tempted by the downloads: Having the requisite regulatory approvals is not only imperative but also indispensable. So, before taking a personal loan from a fintech platform, make sure that the platform is registered and is authorised to indulge in lending activities. Some borrowers fall in the trap of a fintech platform simply because it has a large number of downloads on the Google Play Store.

It is worth recalling here that Google removed nearly 4,700illegal loan apps from PlayStore in a span of two years ending Aug 2023. Notably, a dozen fake loan apps removed by Google in September 2023 had over 1 lakh downloads and 14 had over 50,000 downloads.

Every year, a number of complaints are filed against these lending apps. In fiscal 2023 alone, 1,062 complaints were filed against these fake lending apps, reveals the Finance ministry data shared in Lok Sabha.

III. Customer care mechanism: It is vital to note that the fintech platform should have a well-functioning customer care system.

Although loans can be accessed digitally via an app, if you run into a problem — you may want to speak to someone — yes, someone in flesh and blood. If there is a non-existing customer care department, it is almost impossible to get your grievance redressal via an app.

So, it is always recommended to approach a fintech platform which is credible, has a registered office in a metro city, has a functional customer care number and importantly – enjoys a good reputation in the industry.