Instant loan apps in India: Don’t fall prey to scams; important points to consider before taking out loans online
In the past couple of years, Maharashtra, Karnataka, Delhi, Haryana, Telangana and Andhra Pradesh are some of the states with the highest number of loan application harassment cases reported.
New Delhi, June 5: The number of complaints about scams involving loan apps has grown exponentially in 2021 and 2022. Thanks to the smartphone craze and cheap data plans, people in need of cash are falling prey to ‘unauthorized lending applications.
People are lured by pledging higher loan amount without paperwork. Customers will receive the money instantly but less than the promised amount. As the customer installs the application, they will have access to sensitive customer information.
He will have access to phone contacts, gallery and other information. Using this information, the company will adopt harsh recovery tactics. Loan officers will abuse and harass customers and even call customers’ friends and relatives from their contact list.
In some cases, customers have died by suicide after cyber crooks allegedly circulated transformed photos for failing to repay loans taken out through an instant loan mobile app.
A Reserve Bank of India (RBI) digital lending task force said in a report that as many as 600 “illegal lending apps” are present in several app stores for Android users in India. A total of around 1100 unique Indian loan apps containing keywords like loan, instant loan, fast loan etc. are available in the app stores.
In a bid to prevent illegal digital lending activities, RBI has proposed the Indian government to formulate new legislation. The details were mentioned in a report by the RBI task force on digital lending, including lending through online platforms and mobile apps.
“According to the findings of the task force, there were around 1100 loaner apps available for Indian Android users across more than 80 app stores (from January 1, 2021 to February 28, 2021),” the RBI report said. “Number of app stores where Indian loan apps are available ~ 81. Number of unique Indian loan apps that have the keywords: loan, instant loan, quick loan, etc. ~ 1100. Number of Illegal loan ~600,” he added.
The maximum number of complaints were filed in Maharashtra, followed by Karnataka, Delhi, Haryana, Telangana, Andhra Pradesh, Uttar Pradesh, West Bengal, Tamil Nadu and Gujarat, according to the RBI report.
Important points to consider before taking loans from online applications
Is the lender approved by RBI?
The first thing a customer should do before applying for loans on apps is whether the company is approved by the Reserve Bank of India or not. This ensures that you don’t face repayment related issues as companies that do not follow RBI guidelines would have to harass customers once they take out loans.
Does the lender have a website and physical office?
See if the lender has a proper website and has mentioned all the details about the business. More importantly, see if the lender has a physical office. Most scammers don’t have a website or physical office.
Also check customer reviews which give you a fair idea of the lender. And avoid taking loans from apps without a verification badge. Find out if the app is associated with a bank or a non-bank financial company (NBFC) and vice versa.
Terms and conditions
Many of us tend to ignore the “Terms and Conditions” section. Studies have shown that most people pay attention to “terms and conditions” without realizing that it is an agreement that acts as a legally binding contract between you and the company. So always read the ‘terms and conditions’, especially when making financial transactions online.
Look beyond interest rates
It has been reported that individuals/small businesses are falling prey to an increasing number of unauthorized digital lending platforms/mobile apps on the promise of getting loans quickly and hassle-free. These reports also mention excessive interest rates and additional hidden fees charged to borrowers; adoption of unacceptable and authoritarian recovery methods; and misuse of data access agreements on borrowers’ mobile phones. Therefore, find out all the fees charged by the app, such as prepayment, processing fees, etc.
Don’t get loans without a credit history
People should not take loans from apps that are willing to lend regardless of your credit history and are ready to sanction immediately. Never pay money to get sanctioned loans. “Processing fees are usually charged to you as part of your loan or must be paid directly to the bank on NBFC that offers you the loan. If you are asked to pay part of the loan upfront for processing or if you have to pay cash or transfer money to any personal account, that’s a red flag,” Adhil Shetty, CEO of Bankbazaar, was quoted by The Times of India as saying.