Digital Lending Safety Measures

Digital lending illustration
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Technology and the Internet has really made our life easier. We can do everything, from controlling our appliances to ordering food. Recently, there's a new trend in town: You can borrow money, digitally.

Yes, that's right. Since your financial records are available and stored digitally (your savings, transactions, and shopping history), lending companies can monitor them and help them decide whether you're eligible for a loan or not.

Unfortunately, that doesn't come without consequences. At least in Indonesia, unregulated lending companies offer easy loan with unrealistic interest rates, data misuse, and even abuse. There have been reports and victims from these "digital loan sharks". One even committed suicide.

That is exactly why I'm writing this article. To give you some tips on how to avoid these loan sharks, and if possible, make you ask yourselves whether you need to take the loan or not. Here they are:

Are you borrowing from a regulated creditor?

Financial service has always been a sensitive industry due to their impact on the economy. That is why, it is heavily regulated, no matter where you are.

If you live in Indonesia, the financial industry is regulated by OJK (Otoritas Jasa Keuangan or Financial Services Authority). All fintech and banking companies will have to comply to their regulations. In return, they'll get their "approval stamp", and trust from the people. So, when applying for a digital loan, you'll need to watch out for this approval stamp, like the one below.

Look for this logo whenever you're trying to invest or take a loan.
The logo is watermarked to prevent misuse.
Okay, if you say the stamp can be taken from Google Images, then you can ask for their registration number. If they are indeed registered in the authority, they'll be more than happy to provide you their registration number. Otherwise, well... I think you'll need to get your loan somewhere else.

Do you really, really, really need the loan?

Be mindful before taking a loan. It's going to cost you in the long run.
Okay, now that you've made sure that you borrow money from a reputable, regulated company, time to ask yourself: Do you really need the loan?

Is it needed for something important, or is it possible postpone whatever you want to purchase until the next payday?

Because a loan is not something to be taken lightly. You'll need to commit to paying it until it's paid off, and that will certainly put more burden on your budget in the next few months.

Have you read the loan terms and conditions... twice?

Don't just click agree without knowing what you're signing up for.
Terms and conditions are not enjoyable reading, especially financial ones. But please, do take a moment to read... Or at least ask for a summary. If you're not clear, please do not hesitate to ask again and again, as this will certainly affect how you pay your loan.
Usually, this includes, but not limited to:
  1. Interest calculation
  2. Payment date and amount each month
  3. Late payment penalty
  4. Early settlement penalty
Of course, there may be more. If you either disagree or feel that something is funny, do not hesitate to ask, or even reconsider taking that particular loan.

Are you capable of paying your debt?

I don't mean to underestimate your financial capabilities, but before pulling the trigger on that loan, I strongly recommend to make a forecast on your future budget, making those payments into account.

You don't want to be this person, do you?
If you're still able to afford your living, savings, and bills with those payments, go ahead. Otherwise, well... You know what I'm going to say.

Keep an eye on your app permission

Consider this a bonus tip. Sure, paying your loan is your responsibility and there will be consequences if don't pay on time. However, there are some lenders out there that kinds of go overboard when trying to collect your payments. I'm not blaming any particular company, but it's real. It's on the news, if you're willing to search. One example is terrorizing your contacts randomly late at night.

By default, your applications do not have access to your sensitive information (such as audio recording, camera, messages, etc.). In order to gain access, they'll have to ask your permission. It's usually in the form of a dialog like below.

Watch the permissions your app asks of your phone.
However, what's disastrous is that most people often disregard this request. Either they're way too eager to get a new loan or to use the app, they just click that "Allow" button without even thinking what the app can do with that permission. One example is to access your contact, and do God-knows-what with it. It could be worse: they can even steal your pictures or take a picture unknowingly.

That's why I highly recommend you to think about the permissions you give to your apps. If that permission sounds irrelevant or even suspicious, reject that request. If the developer can explain why they need such permissions, you can reconsider. If they don't, maybe it's time to find an alternative?

Conclusion: Know What You're Up Against

Knowing what you're up against is the first step in the right direction before
taking that loan.
Taking a loan is not a sinful act. It's even necessary in some cases. However, before pulling that trigger, you need to make sure that you understand what you're up against. And like shopping, it's strongly recommended to compare between one loan products to another. Who knows, there could be some beneficial promotions, gifts, etc.

Oh, and last but not least, make sure you can pay it off. Once your credit score tumbles, you may have a hard time applying for other financial services such as mortgage and credit cards.

Well, I guess that's all for now, Folks. I hope this small article can help you identify what to do before you decide to take a loan. As usual, if you have any questions or comments, feel free to sound them off in the comments section below. Finally, as usual, thanks for reading and see you in the next article! :D

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