From convenience to crisis: The risks of online lending for students

Hemalatha Y .N.

In today's digital age, the convenience of online lending has become a reality, especially for students who need quick access to funds. Many online apps have emerged, promising instant loans with minimal documentation requirements.

Suma Yelavarthy, A senior chartered accountant at KPMG, said in the current scenario online lending apps are targeting students. Especially apps like Slice, Kredit Bee, Mobi Kwik, SuperMoney, and mPocket, they often charge high interest rates, with some even reaching triple digits. Students may end up repaying double the amount they initially borrowed. Each app has its own repayment terms, further reflecting on the financial burden on students.

Source : GoBankingRates

“These apps do not conduct a detailed process of credit checks or income verifications like traditional banks do. Instead, they simplify the process by only seeking basic documents such as a student's PAN card, Aadhaar card, and student ID for online verification. This ease of access to loans may attract students to borrow without considering their ability to repay, trapping them in a cycle of debt.”

Yelavarthy also emphasised on the risk factors saying that, using multiple apps and providing PAN numbers can negatively impact on their cibil score, affecting their future financial opportunities like applying for education loans, or getting personal loans, particularly if their loan applications get rejected. It is very important for students to try alternative options such as scholarships, part-time jobs, or low-interest student loans from trusted banks before getting into such risk, she added.  

Source : Credit Mantri

Dheeraj J, a Slice user said, “I have been using Slice for the past 2 years, which was initially good and offered a high interest rate. I found that it was more suitable for working professionals rather than college students, because we students easily get addicted to using

it. Over time, I faced more problems than benefits, which added more stress to my student life. Later, I became increasingly dependent on the Slice app, which made it difficult for me to control my spending habits.”

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