THE VICIOUS CYCLE OF INSTANT LOAN APPS

Ever caught up in a situation where you needed money for paying a medical bill or ever wanted to buy your favourite gadget but found yourself short on savings? Getting a personal loan has never been an easy task. But with instant loan apps you can avail loans in the blink of an eye. With the paperless transactions and without any official documentation instant loans might sound like a boon to many people. 

But is it? 

As per TOI, A 36- years old man in Hyderabad allegedly ended his life, unable to bear the humiliation and harassment over non payment of instant loans availed through online applications and this brought our attention to the sinister side of instant loan apps.

What is the instant personal loans scam?

It is a racket in which instant personal loans are offered through mobile applications at exorbitant interest rates by unauthorized lenders. Of the several apps that are available on google PlayStore, most do not have any tie-up with any bank or non-banking financial institution. A customer can avail a loan within few minutes after uploading personal details, three months’ bank statement, Aadhar card copy, PAN card copy on the mobile application. Loans from as less as Rs 1,000 to Rs 50,000 can be availed for a period of seven days. The rate of interest is as high as per cent in addition to the exorbitant fees. For instance, if a person seeks a loan of Rs 5,000, the app company will charge Rs 1,180 as GST and processing fees and credit only Rs 3,820. The lending companies have call centers located in Hyderabad and Gurugram from where the tele-callers and recovery agents interact with borrowers. Many people who lost their jobs during the pandemic or who needed money urgently borrowed money from the apps and got caught up in a vicious cycle of debt trap. 

What is the modus operandi?

After a customer downloads an app and uploads the required documents, the loan amount is credited into the bank account. The phone number of the customer as well as numbers of his family members and friends are shared by the app company with others. After a customer avails one loan, tele-callers and agents of about 25-30 similar apps call the customers and lure them into availing more loans, saying they are eligible because their credentials have been verified by the company from which they borrowed the first loan. Many customers fell for this fraudulent trick and ended borrowing up to Rs 50,000. While the interest rate is 35 per cent, after the due date, a flat Rs 3,000 penalty per day is levied on the customer. Many customers end up borrowing more to repay a previous instant loan.

How are the victims affected?

Apart from levying hefty penalties for failure or delay in repayment of loan, the agents use a mixture of coercion, threats and blackmail. After issuing loans to customers from the app for seven days, they divide all the customers into different categories of buckets. On a due date, it is called as D-0 bucket; after the due date from day 1 to day 3, it is S1 bucket; from day 4 to 10, it is S2 bucket; and from day 11 to 30, it is S3 bucket. The treatment of a customer depends on which bucket he lies.

The police in India have identified the following mobile apps which are offering instant loans at hefty interest rates. Cash Mama, Loan Zone, Dhana Dhan Loan, Cash Up, Cash bus, Mera Loan, Hey Fish, Monkey cash, Cash Elephant, Water Elephant, QuickCash, Kissht, LoanCloud, InstaRupee Loan, Flash Rupee-Cash Loan, Mastermelon Cashtrain, GetRupee, ePay Loan, Panda iCredit, EasyLoan, RupeeClick, OCash, Cashmap, Snapit, RapidRupee, ReadyCash, Loan Bazaar, Loanbro, Cash Post, Rupeego, Cash Port, RsRush, Pro Fortune Bag, Rupee Loan, Robocash, CashTM, Udhaar Loan, Credit Free.

How to protect yourself from such scams?

It is imperative that every person should use optimum caution while doing transactions so that they remain safe from fraudsters and scammers promising instant loans. Users should check the authenticity of the app before downloading it and evaluate the terms and conditions of the offer. 

Stay Smart! Stay Satark!

                            By - Ishika Gupta