Explained: Why You Should Beware Of Quick Loan Apps Installed On Your Phone
Covid-related slowdowns have hit personal finances and businesses extremely hard, with the thought of "instant money" at the click of your phone's screen tantalising to many. Smelling blood, desperation and increased despondency, loan sharks are now swimming in your devices disguised as seemingly legit finance apps for lending and borrowing money.
But the safety imbued in quick loan mobile apps has been brought into question lately and for good reason. Here's why:
Loan sharks are now attacking digital ecosystems by promising instant money to people who are running from pillar to post in the aftermath of the COVID-19 pandemic which has decimated businesses and rendered millions jobless around the globe.?
While the money lenders may come off as benign and noble behind an inviting app interface, being wary of loan sharks may actually be a better idea for your pockets.?
How loan sharks from China infested Indian markets
In 2020, loan shark applications from China burnt a hole in the savings of many people in India who needed instant money.?In the aftermath of this unregulated mishap, the Reserve Bank of India is drafting new rules for digital lenders.?
According to an Economic Times report from last June, at least 50 apps at that time were harassing their users endlessly, many pushing others to suicide, which drove Google to removing 400 such apps from its Play Store in January, 2021.?
Most apps look legit and carry names like Money Loan, Loan Paisa, Loan Udhaar, Go Cash, Money In Need, etc. - emulating the characteristics of a verified lender.?
Amid high interest rates and endless harassment, loan defaulters are left without a safety net when deadlines aren't met. In many cases, such applications will resorting to public mud slinging in hopes of getting their money back.
Like physical loan sharks, digital money lenders operate by attacking the vulnerable and those in dire need of financial assistance.?While it may look convenient in the beginning, such experiences turn into nightmares pretty quickly as due dates are missed.?
In some cases, interest rates are as high as 60 to 100 per cent.?
Such predatory goals are met through incessant calls, and making the defaulter's details public by reaching out to their private contacts.?
When most applications are installed on your phone, they demand access like an entitled child - to storage, to contacts, and to the camera and microphone. While it's difficult to pin point which applications use this data, such unrestricted contact and data access can give them an advantage when someone defaults on their loans.
How loan sharks weaponise your personal data
Where does the money come from, you wonder? A MoneyControl investigation revealed that most money emanates from high net worth individuals (HNI) or from foreign entities.?Most of these expect the loan repayment within 7-15 days, with the average amount ranging from Rs 3,000 to 50,000.?
Who doesn't want quick money without the hassle of documentation? Trust us, you don't!?
In fact, if a platform doesn't require lengthy documentation, it should be a clear red flag and you should steer clear of it. And while regular banks may require certain documents and pre-requisities for loans, the interest rates are as low as 7-12 per cent and your data will not be at risk.?
Without any documentation, it is assumed that one will return the money in due time, but that usually doesn't happen, especially with loans that have short return windows.?Your personal data then, is fished out from your device instead of through mandated documents or KYC.?
What happens next is the apps begin their harassment campaign - first they call the user, then their close contacts.?Essentially - they want their money back, by hook or by crook.?
With no regard for the well-being of users, digital spaces essentially codify the vulnerabilities that are part of even physical lenders. Even then, some applications do follow proper documentation guidelines and source money from a bank, while the 'bad ones' essentially have a dubious source of money and absurd interest rates.?
Essentially, if apps don't tell you where their money is coming from, they're most likely predatory and 'illegal'... in the sense that if things went south, there most likely isn't a way for you to get your concerns addressed.?
In fact, most instant money loan shark apps intimidate the buyer with a downgraded credit score and urge them to take up another loan to pay off the first one. And the vicious cycle begins at that point.?Referred to as "ever-greening" of loans, the practice is banned in India.?
The dark truth behind online loans
The intensity of the situation became public after a slew of suicides in the Indian state of Telangana, forcing officials to nab the perpetrators who turned out to be foreign nationals.?As many as 60 such apps were found to be running illegally in Telangana alone while 28 were operating from Karnataka.?
According to the police, an uptick in predatory loan apps was noticed after the first lockdown was imposed nationwide in March, 2020 to slow the spread of COVID-19.?And for other apps that you may have installed in hopes of getting a quick loan, know that if they're not asking for official data, you are the data.?
There are two types of lenders - shadow banks who facilitate loans themselves, and agents that offer loans on behalf of these banks. The latter, however may be trespassing the fair practices code.?And the worst part? Most lenders don't even give the full amount to borrowers.
A problem that has plagued India for decades has gained visibility due to its digital nature.?
While loan sharks that offer money in exchange for property and personal favours continue to persist in rural areas where banks have limited reach, their practices have been successfully replicated by call centres, most of which operate out of India and Indonesia and threaten borrowers.?
Android users at increased risk
Android users are more at risk of such scams that mostly target users aged between 21 and 40.?Not too long ago, a Chinese app for lending money "MoNeed" leaked personal information of over 350 million Indian users onto the dark web, where who knows what becomes of one's data.?
The dark web is completely unregulated and considered a breeding ground for criminal activities by authorities.?
This particular app demanded a series of serious permissions including turning the wifi on and off, full network access, reading the phone status, and modifying the content of a borrower's USB storage among many.?
How to keep safe when borrowing money online?
1. Check whether they're approved by the RBI to lend money. If the lender isn't connected to a bank and doesn't have an NBFC licence, they're most likely fake.?
2. Don't fall for "quick loans" that claim to offer money instantly. Most of them have extremely high interest rates.?
3. If the lender doesn't care about your credit history, they don't care about you. Instead, go to legitimate lenders and banks where not only your data is safe, but the interest rates are a lot more humane.?
In need of money? Worry not, you may verify the lender and their credentials on the RBI website.
Hopefully, you are now up to speed with the topic of loan apps in India and the state of dodgy money lending practices you can unwittingly fall prey to. For more explainers on a wide variety of topics, keep visiting Indiatimes Explainers.
