Secure Loans Digitally As Well As Protect Your Privacy
The rise of the internet in the 21st century has inadvertently accentuated the growth of digital loans secured via digital lending platforms. It stands contrary to the ways of the traditional banking system where customers must visit physical locations to secure loans through lengthy and time consuming procedures. Individuals can now secure loans from the comforts of their homes through swift and fast procedures. The digital lending platforms in India are expected to bring a revolution in the banking industry as it is set to grow from USD 38.2 billion in 2021 to nearly USD 505 billion by 2023 as per the IIFL FinTech report. However, this rapid expansion brings challenges related to data privacy that require your careful attention.How Digital Loans Differ from Traditional Loans?Digital loans differ from traditional loans in a handful of ways. The application process for digital loans is streamlined and does not require any face-to-face interaction which makes traditional loan procedures a relatively more tedious process. The use of the latest technology including artificial technology allows a convenient approach to analyze data instead of heavy reliance on paperwork in a traditional bank system. Digital loans provide greater transparency where each step of the way can be tracked online, whereas traditional banking systems do not provide the same level of transparency.While there are benefits of securing a loan online, a major concern is violation of privacy. In the digital era, privacy is understood in the context of the protection of information produced online from unauthorized access, use, or disclosure. When an individual secures a loan online, certain confidential documents are to be necessarily provided. This set of information needs protection at all costs, to prevent the user from subsequent identity theft, financial loss and other forms of fraud. To understand the steps to protect privacy, it is important to understand how a loan is secured online.Digital loans differ from traditional loans in a handful of ways.How a Loan is Secured Online?Securing a loan online involves several steps, each designed to ensure convenience and efficiency. Here is a breakdown of the typical process:Research and Comparison: Borrowers start by researching and comparing various online lenders and loan products. They should consider interest rates, loan terms, fees, and the lender’s reputation.Application Submission: Once a suitable lender is identified, the borrower completes an online application. This process requires personal information, financial details, and the purpose of the loan.Document Upload: The borrower may need to upload supporting documents such as identification, income proof, and bank statements. Many platforms offer secure portals for document submission.Credit Assessment: The lender uses automated systems to assess the borrower’s creditworthiness. This may include checking credit scores, analyzing financial history, and evaluating the applicant’s debt-to-income ratio.Approval and Offer: If the application is approved, the lender presents a loan offer outlining the terms and conditions. The borrower reviews the offer and accepts it if it meets their needs.E-Signature: The borrower provides an electronic signature to finalize the agreement. This step is legally binding and confirms the borrower’s acceptance of the loan terms.Disbursement: Upon receiving the signed agreement, the lender disburses the loan amount directly to the borrower’s bank account.Risk to Privacy in Digital Loans & How to Counter It?As a borrower, you might come across certain situations which can lead to privacy violations, if you are not careful enough. Therefore, it is important to understand such instances and learn how to counter them. The risks to borrowers can be summed up as follows:Frauds and Scams: Unethical entities may pose as legitimate lenders to ask for certain confidential documents which they use for unauthorized transactions and cause financial harm and loss to the borrower.How to counter it – Provide only necessary information: ensure that the communications happen only with officials of the company. Additionally, steps can be taken to confirm with the support team whenever you receive emails or SMS in this regard. Such an act would ensure that your information is secure with you.Privacy Violations: Some online lenders may have inadequate privacy policies which the borrower must be aware of. It can lead to the unauthorized use of personal data as well as the sale of information to third-party entities opening up a plethora of unwanted consequences.How to counter it – Read the privacy policy: Carefully reading the lender’s privacy policy and terms of service to understand its intricacies comes at an advantage as it secures you from privacy violations to which you consent when you click on the “Agree with the terms and conditions.”Phishing attacks: Phishing attacks are a common trick used by cybercriminals where emails and messages with deceptively similar domains and numbers are received by the borrower. The reasonable belief of the borrower on this fraudulent information leads to such data leaks.How to counter it – Do not provide your personal information in response to an unsolicited request and contact the financial institution, if you believe that the contact is not legitimate. Monitor your accounts regularly and if you do fall prey to a phishing attack, act immediately.Best Practices to Enhance Security:It is important to adhere to certain practices that ensure that your information online is secured. Doing the following steps can secure your documents online and your future as well:Regular monitoring: Regularly monitor your bank accounts and credit reports where you may notice any unusual activities. Identifying such incidents and suspicious transactions and reporting them to your loan provider may save your account before any financial loss occurs.Strong passwords: Using strong, unique passwords in the place of your or your loved one’s birthday ensures that cybercriminals have a less likely chance of decoding them. Utilizing a password manager would help you in case of repeated incidents of forgetting these passwords.Updated software: Making use of the latest technology and installing antivirus software in your system keeps it secure. Keeping the device software up to date protects it from threats of malware and other similar threats.Reserve Bank of India’s Guidelines on Digital Lending:These guidelines were realized in the year 2023 and they aim at protecting the customers from concerns of data privacy breaches. misuse of data collected and unethical conduct. It mandates that any loan disbursement or its repayment by a financial entity cannot be carried out through the account of any third party and must be made directly to the borrower’s bank account, except in specified cases. Data collection done by Lending Service Providers is on a need basis and every stage requires explicit consent to be provided by the borrower. It even includes acquiring explicit consent for sharing information with third-party entities. Only that information may be stored which is required to carry out the lending operations such as the name, address, and contact number.Therefore, it is important to secure loans from Digital lending platforms which are approved by the RBI. Ensure that digital platforms are credible based on your research. Platforms like CreditSea strive to ensure the best personalized loans to meet your needs.Conclusion:Securing a loan digitally is very convenient in this technologically advanced era, but it requires an equally active vigilance to protect personal information and privacy. By understanding the risk involved and following sound practices, a borrower can prevent financial burden accruing due to privacy breach. Stay informed, stay vigilant and make informed choices to keep yourself safe in this digital age.
