Gone are the days when a loan seeker had to literally run from pillar to post to procure a personal loan. Now with a barrage of loan options to choose from, consumers do not need to rely on a large financial institution alone. Besides a large bank, one can also approach an NBFC or a loan lending app to meet immediate financial need.
However, there is a little catch there. While commercial banks and large NBFCs are still somewhat reliable, small fintech apps have yet to strike a chord with the masses. It is, therefore, recommended to be extra careful about raising loans before jumping on the bandwagon. So, while there are more options around you, so are the occurrences of frauds.
In terms of domestic payments in India, the value of total frauds amounted to ₹220 crore in Oct 2022. This has now grown to ₹411 crore in Oct 2024, almost double of two years ago, reveals the RBI data.
In volume terms, these figures stood at 1.79 lakh and 2.35 lakh, respectively in Oct 2022 and Oct 2024.
Total fraudulent transactions | Oct 22 | Oct 24 |
Value terms | ₹220 crore | ₹411 crore |
No of transactions | 1.79 lakh | 2.35 lakh |
(Source: RBI)
Notably, the spike in total volume of fraudulent transactions has happened despite the lower frequency of such transactions. Sample this: while in Oct 2022, one in 59,533 transactions turned out to be fraudulent but now the corresponding data stands at 87,724.
Here we share some key tips before you apply for a personal loan at one of the fintech apps to avoid falling into the trap of a fraud.
1. High credit score: At the outset, opt for a bank if your credit score is high and it is easy to raise a loan from a financial institution. Seeking a loan from a fintech app is typically a good option when you are unable to procure a personal loan from a bank.
2. Background check: Before you sign the dotted line, exercise caution and carry out as extensive background check as possible of fintech apps you want to raise the money from.
3. Too good to be true: Sometimes, fintech apps promise moon to their consumers in order to woo them to borrow at their platforms. From instant loans to lower interest rates and no documents -- they may say anything but one should remember that the goal of any financial institution is to earn money. And you should also examine where their promises are too good to be true.
4. RBI-recognised: Another pertinent point is to check whether the app is registered with a bank or NBFC, registered with RBI. Even if the app is downloadable on Android or Apple store, it is meant to follow the regulations of RBI.
Notably, Google had removed over 2,500 fraudulent loan apps from Google Play Store between April 2021 and July 2022, Government of India had informed the Parliament in Dec 2023.
5. Recommendation works: Before relying on an app to meet your financial needs, it is vital to look for the recommendation. Consumers should also check how many times the app has been downloaded, what are the reviews on PlayStore and also on social platforms such as Reddit.
6. Start small: Despite taking necessary steps, if you are still not confident, it is recommended to start small. This means rather than relying on an app for say, ₹5 lakh, you may contemplate raising a small amount.
And if your experience turns out to be good, you can raise the amount at a later stage.
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