'Fast digital loans convenient but fraught with risk for some'

Although fast digital loans are accessible and hassle-free for customers, they are at risk of becoming a debt trap when borrowers rely on new credit to repay existing obligations rather than on stable monthly income, UAE experts have warned.

- Azza Al Ali [e-mail]

For students and gig workers, income is not always predictable, but repayments are, warn experts.

The experts highlighted growing concerns about app-based lending among vulnerable groups.

Brijesh Kumar, chief business officer at Paisabazaar.ae, said the danger escalates when short-term digital loans are used to cover routine expenses such as rent, utilities, or tuition fees rather than genuine emergencies. “Once a borrower starts rolling over short-term credit to manage cash flow, the cost of credit rises sharply and financial stress compounds quickly,” he said.

Students, gig workers, and low-income earners are particularly exposed, Kumar noted, as irregular or delayed salary payments can clash with the short tenures typical of digital loans. High processing fees and penalties can quickly consume a disproportionate share of income, leaving borrowers with little room to meet basic needs. “For low-income borrowers, even one missed installment can trigger a spiral of penalties or additional borrowing,” he added.