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Vapi’s Ashwin Kumar( name changed) is caught between the devil and the deep sea. And this sea is infested with sharks. He draws a  monthly salary of Rs 12,000. He was happy to become a father but his son had an ailment that required a monthly blood transfusion. An added cost of Rs 5,000 per month. He exhausted all his options with family and friends. This was when he came to know about the digital lending apps that provided quick instant hassle-free loans with no paperwork. These short duration loans seemed a good option to bail him out of his misery. Little did he know that this short term relief would be a long term pain.

What went wrong?

Due to financial stress, Ashwin failed to pay back on time. His stress level peaked because the pending loan amount was surging daily.  He did not grasp the terms and conditions of the loan. The interest was levied daily. A 9.50% interest on a personal looks like a considerable but if  it is 1 or 2 % daily, then it works out to 30-60% in a month.  Delay of payment attracts a late payment charge as well.  Not just Ashwin but his friends and family members were continuously receiving recovery calls and threatening messages. When you download this app they ask you for multiple permissions. Through this permission, they get access to your phonebook and photo gallery. This information is used to threaten and blackmail you when you are unable to pay it back on time.

How scary is the situation?

According to Digital Lender Association of India’s Anuj Kacker who is also the COO and co-founder of MoneyTap, says – “These lenders give loans without checking the repayment ability of borrowers. Once the borrower is trapped, it’s easy for him to get caught up in the circle of bad debt. One may take another loan to pay off the first loan and another to pay off the second loan and it goes on.” He feels there is a need for regulation as several unofficial and unorganised apps have mushroomed. The need of the hour is to have some rules in place to govern this sector.

Cybercrime investigator Ritesh Mehta says that with increased penetration of the internet and mobile phones more and more people are getting used to the new digital world. A loan that is approved in a jiffy with no hassle of going to the bank can attract them more. A small amount, short duration loans- lure the borrowers. But your personal details and official data could be at stake. Ritesh in a month gets 4-5 complaints where the complainant tells him how either his PAN or Aadhar card details were circulated in Whatsapp group or he was threatened that his or her picture will be morphed and circulated in social media. He feels the lack of data privacy laws is also giving these cyber bullies a field day.

What are the red flags when you take loans from these apps?

• No loan agreement letter
• These companies have no address
• Quick KYC only with Aadhar copy
• They never see your payback ability and ask for your income proof
• They charge you a pre-processing fee

These digital lending apps don’t fall under the category of banks or NBFCs and are not governed by RBI regulations. Be very careful before opting for these kinds of loans which may look easy but could cost you a lot more.