The Covid-related downturns have hit personal finances and businesses extremely hard, with the idea of ’instant money’ at the click of your phone screen being enticing to many. Sensing blood, desperation, and heightened discouragement, loan sharks are now swimming in your devices disguised as seemingly legitimate financial apps to lend and borrow money.
But the inherent security of quick loan mobile apps has been called into question lately, and for good reason. Here’s why:
Loans are now attacking digital ecosystems by promising instant cash to people running from pillar to post in the aftermath of the COVID-19 pandemic which has decimated businesses and made millions of people unemployed around the world.
While money lenders may seem benign and noble behind an attractive app interface, being wary of loan sharks may actually be a better idea for your pockets..
How Chinese loan sharks infested Indian markets
In 2020, China’s loan shark demands left a hole in the economies of many people in India who needed instant cash. In the wake of this unregulated incident, the Reserve Bank of India is developing new rules for digital lenders.
According to a report from the Economic Times last June, at least 50 apps at the time were incessantly harassing their users, many leading others to suicide, which led Google to remove 400 of these apps from its Play Store in January 2021.
Most of the apps look legitimate and have 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, delinquent debtors find themselves without a safety net when deadlines are missed. In many cases, such apps will resort to public sludge in the hopes of getting their money back.
Like physical loan sharks, digital money lenders operate by attacking the vulnerable and those in urgent need of financial assistance. While it may seem convenient at first, experiences like this turn into nightmares pretty quickly when due dates are missed.
In some cases, interest rates can reach 60 to 100 percent.
These predatory goals are achieved through incessant appeals and by making the details of the defaulter public by speaking to their private contacts..
When most apps are installed on your phone, they require child-like access – to storage, contacts, camera, and microphone. While it is difficult to determine which apps are using this data, such contact and unrestricted access to data can give them an edge when someone is not paying back their loans.
How loan sharks militarize your personal data
Where does the money come from, you ask? A MoneyControl investigation found that most of the money comes from high net worth individuals (HNIs) or foreign entities. Most of them expect the loan to be repaid within 7-15 days, with an average amount ranging from Rs 3,000 to Rs 50,000.
Who doesn’t want quick cash without the hassle of documentation? Trust us, you don’t!
In fact, if a platform doesn’t require extensive documentation, that should be a clear red flag and you should steer clear of it. And while regular banks may require certain documents and preconditions for loans, interest rates are as low as 7-12% and your data will not be threatened.
Without any documentation, it is assumed that the money will be repaid on time, but this usually does not happen, especially with loans that have short payback windows. Your personal data is then extracted from your device instead of going through mandatory or KYC documents.
What happens next is the apps start their harassment campaign – they call the user first, then their close contacts. Basically – they want their money back, hook or crook.
Regardless of the well-being of users, digital spaces essentially codify the vulnerabilities that are part of physical lenders. Even so, some apps follow the proper documentation guidelines and source from a bank, while the “bad” ones basically have a dubious source of money and absurd interest rates.
Essentially, if apps don’t tell you where their money is coming from, they are most likely predatory and ‘illegal’ … in the sense that if things go wrong there is probably no way for you to get your concerns taken care of.
In fact, most instant moneylender apps intimidate the buyer with a downgraded credit score and trick them into taking out another loan to pay off the first one. And the vicious cycle begins at this point. Called “permanent greening” of loans, this practice is prohibited in India.
The Dark Truth Behind Online Loans
The intensity of the situation became public after a series of suicides in the Indian state of Telangana, forcing authorities to catch the perpetrators who turned out to be foreign nationals. No less than 60 of these apps were operating illegally in Telangana alone, while 28 were operating from Karnataka.
Police said a slight increase in predatory loan applications was noticed after the first nationwide lockdown was imposed in March 2020 to slow the spread of COVID-19. And for other apps that you might have installed hoping to get a quick loan, be aware that if they don’t ask for official data, you are the data.
There are two types of lenders: shadow banks which themselves facilitate loans and agents who offer loans on behalf of these banks. The latter, however, may violate the code of practice. And the worst ? Most lenders don’t even give borrowers the full amount.
An issue that has plagued India for decades has gained visibility due to its digital nature.
While loan sharks who offer money in exchange for goods and personal favors persist in rural areas where banks have limited reach, their practices have been successfully replicated by call centers, most of which have been operating since. India and Indonesia and threaten borrowers.
Android users are at increased risk
Android users are at higher risk of such scams which mainly target users between the ages of 21 and 40. Not too long ago, a Chinese money lending app “MoNeed” leaked the personal information of more than 350 million Indian users to the dark web, or who knows what happens to their data.
The dark web is completely unregulated and considered a breeding ground for criminal activity by the authorities.
This particular app required a series of serious permissions, including enabling and disabling wifi, full network access, reading phone status, and changing the contents of a borrower’s USB storage among so many. others.
How to protect yourself when borrowing money online
1. Check if they are approved by the RBI to lend money. If the lender is not connected to a bank and does not have an NBFC license, it is most likely a fake.
2. Don’t fall for “quick loans” that claim to offer instant cash. 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 is your data safe, but the interest rates are much more humane.
Need money ? Don’t worry, you can verify the lender and their credentials on the RBI website.
Hope you are now up to date with the subject of loan applications in India and the state of questionable money lending practices that you may unwittingly fall prey to. For more explanations on a wide variety of topics, continue to visit Indiatimes Explainers.