Dos and don’ts of borrowing from lending apps: Tips for safe and smart borrowing

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Lending apps have revolutionized the way people access loans by making the process quick and convenient. However, borrowing money through these apps comes with its own set of risks. If not handled wisely, it can lead to financial strain or scams. Here’s a guide to help you make informed decisions when borrowing from lending apps.

Dos of borrowing from lending apps

1. Research the app's credibility

Do: Choose apps that are registered with the Reserve Bank of India (RBI) or regulated financial institutions.

Why: This ensures you’re dealing with a legitimate platform and reduces the risk of fraud.

2. Read the terms and conditions carefully

Do: Understand the interest rates, repayment schedules, and any additional fees before accepting a loan.

Why: Hidden charges can inflate your repayment amount significantly.

3. Borrow only what you need

Do: Assess your financial situation and borrow an amount you can comfortably repay within the stipulated time.

Why: Over-borrowing can lead to a debt trap.

4. Check for secure technology

Do: Ensure the app uses secure encryption methods to protect your personal and financial data.

Why: This safeguards you from data breaches and identity theft.

5. Keep track of repayment schedules

Do: Set reminders for repayment dates or enable auto-debit to avoid missed payments.

Why: Timely repayments improve your credit score and prevent penalties.

Don'ts of borrowing from lending apps

1. Don’t trust unverified apps

Don’t: Download or borrow from apps that are not listed on official app stores or lack clear regulatory backing.

Why: Unverified apps may be scams designed to steal your money or data.

2. Don’t ignore the interest rates

Don’t: Accept loans without calculating the effective cost, including interest rates and processing fees.

Why: High interest rates can turn a small loan into a large financial burden.

3. Don’t borrow for non-essential expenses

Don’t: Use lending apps to fund unnecessary purchases like luxury items or vacations.

Why: Loans should ideally be reserved for emergencies or productive purposes.

4. Don’t share sensitive information carelessly

Don’t: Provide details like OTPs, passwords, or financial data over calls or messages to anyone claiming to be from the app.

Why: Legitimate apps will never ask for sensitive information through insecure channels.

5. Don’t rely on multiple apps simultaneously

Don’t: Borrow from multiple apps to manage repayments of other loans.

Why: This can lead to a debt spiral and damage your credit score.

Final tips for safe borrowing

Plan your repayment: Create a budget to ensure timely repayments and avoid defaults.

Check customer reviews: Read app reviews on trusted platforms to understand user experiences.

Consult a financial advisor: If unsure about the loan terms, seek professional advice before borrowing.

Borrowing from lending apps can be a lifesaver in emergencies, but it requires caution and responsibility. By following these dos and don’ts, you can make the most of lending apps without jeopardizing your financial health.