From lack of regulation and licensing to upfront fees: Expert suggests 5 ways to spot a fake lending platform

In the age of online lending platforms, individuals have many options for financing their needs, from personal expenses to business enterprises. The growing number of lending platforms poses the risk of fraudulent players, posing a significant risk to unsuspecting borrowers. Identifying fake lending platforms is crucial to ensuring financial security and avoiding scams. 

Sidharth Vishwanathan, Chief Risk Officer, KreditBee, spells out five essential strategies to spot fraudulent lenders so that borrowers can make an informed decision about financial assistance. Borrowers can use these key indicators to navigate the lending landscape, protect themselves against exploitation, and preserve their financial well-being.

Here are five ways to identify potential red flags —

1. Lack of Regulation and Licensing: Authentic lending platforms are usually regulated by the RBI in India, says Sidharth. "Check if the platform is licensed and registered with RBI. Absence of such credentials or suspicious claims about being exempt from regulation should raise concerns. A simple way to be sure is check the RBI website," he enlightens.

2. Unrealistic Terms and Guarantees: He asks borrowers to beware of lenders offering excessively favourable terms, such as extremely low interest rates or no credit checks. "Legitimate lenders assess borrowers' creditworthiness and offer terms accordingly. Any offer that seem too good to be true is likely a cause for caution," he adds.

3. Poor Online Presence and Reviews: Legal lending platforms have a professional website, active social media accounts, and multiple reviews from customers. The Chief Risk Officer at KreditBee says that contrary to this, fake platforms may have poorly designed websites, limited online presence, or numerous negative reviews complaining about hidden fees and a non-existent customer support.

4. Request for Upfront Fees or Personal Information: One way of identifying reputable lenders is by ascertaining that they're deducting fees from the loan amount or including them in monthly payments. "Be cautious if a lender requests upfront fees before disbursing a loan," he warns. 

5. Lack of Transparency and Contact Information: Legitimate lending platforms are transparent about their loan terms, fees, repayment schedules, and contact information. He states, "If a lender hesitates to provide clear details or is difficult to reach via phone, email, or physical address, it's likely a sign of illegal practices."

Summarising his checklist for borrowers, Sidharth says, "By remaining vigilant and conducting thorough research before engaging with any lending platform, you can mitigate the risk of falling victim to fraudulent schemes and protect your financial well-being."