Exercise caution while applying for online personal loans

Samarjit Kambam *

Of late, we can witness advertisements of numerous online loan apps on Youtube and other social media platforms. You must have also seen SMSes on your smartphone inviting you to take online personal loans from such apps. In fact, many business corporations with their loan apps have taken the Nation by storm since the last few years.

With the economy hit hard by the Covid-19 pandemic leading to substantial loss of jobs throughout the length and breadth of the country, many have been compelled to take online loans as a breather from the economic hardships.

The online lenders have ever since increased manifold with their online apps as thick as air. The irony is that most of the online lenders turn out to be illegitimate ones. There have been instances of malpractices by such online lenders with fraudulent apps.

Mention may be made of violation of user safety policy, excessive rates of interest, additional hidden charges being demanded from borrowers; adoption of unacceptable and high-handed recovery methods and misuse of agreements to access data on the mobile phones of the borrowers. As a result, many people who applied for online loans for some relief find themselves at the receiving end.

If you go to Playstore on your smartphone, you will find an endless stream of online loan apps. It is highly advisable that you do not fall prey to apps of companies that are not legit. Once you open a fraudulent app, you will be welcomed with interfaces mentioning that you are eligible to take loan for a particular amount at free interest rate. Well, appearances can be deceptive and there is no such thing as ‘free’ in this world.

Due to financial constraints, you may be compelled to apply for a loan. The irony is that, in fraudulent apps, the detailed structure of the loan will be reflected in the bill only when the loan is sanctioned.

There, you will find arbitrary upfront Processing Fee of 15–20% with GST of 18% and interest rate upto 40% per annum and other additional hidden charges. This implies that if you apply for Rs. 10,000/-, you will be getting around Rs. 8600/- only and by the time you repay, you have to part with Rs. 11,000/- of your hard earned money. The loan duration usually ranges from 7 to 10 days and you can opt for extension provided you pay the extension fee. This is tantamount to broad daylight extortion.

As of February 2021, there were about 600 illegal lending apps. The Ministry of Electronics and Information Technology (MeitY) has blocked 27 unlawful loan lending apps under section 69A of Information Technology (IT) Act, 2000. Google Inc also has recently removed around 100 personal loan apps in India violating its user safety policy.

The apps removed charged higher interest rates, collected personal data, and misused the data for unlawful practices. Course there are online lending companies which fall under the category of NBFC (Non-Banking Financial Company) registered with Reserve Bank of India. However, the number of illegal lending platforms far outnumber the legit ones.

Mention of some legit online lending platforms providing personal loans may be made of Kreditbee, Rufilo, Cashbean, Paysense, EarlySalary, StashFin, Dhani, CASHe etc. There are also legit online lending platforms that provide business loans such Bajaj Finserv, Fullerton India, Lendingkart etc.

The apps of legit online lenders will be associated with transparent terms and conditions including name of the registered company and address, website, e-mail ID and customer care service. The charges and penal interest charged for late repayment or prepayment will be specifically mentioned in the loan agreement to be executed between the customer and the company.

The duration of loan will be in terms of months and not days. They will adhere to the guidelines of RBI and reveal their Company Identification Number (CIN) and Certificate of Registration (CoR). To ensure best possible experience for all, the lenders licensed by RBI are ethical and tend to follow a code of conduct with a strict set of guidelines in working with borrowers.

Many people have found themselves as victims after taking online personal loans from lending platforms of illegitimate lenders. One should be aware that such companies hire third party agents for recovery of the loans taken. They are usually people of very low standards. In the terms and conditions of the loan app the last date will be mentioned but the timing for repayment will not be there.

They will harass you repeatedly to pay before 10 am of the last day. They will reach out to all your contacts through WhatsApp sending messages that you have not repaid the loan in time for being late by 10 minutes.

Very unethical. They use bad languages and expletives spoiling your day and giving you mental torture. Such are acts of giving harassments to the highest degree. You will feel humiliated in front of your peers and relatives also.

To avoid yourself from landing into such awkward situations, you need to find out the genuineness of the lender before applying for a loan. Identifying whether the lender is an authorised one is of utmost importance. A lender not approved by RBI is most likely to have a hidden agenda and are not bound by privacy rules.

The unauthorised lenders will not have any mechanism for redressal of grievances in their lending platforms. They will neither have a customer care service nor will they disclose their contact numbers or e-mail IDs. Mention may be made of some unauthorised lending platforms viz, CrazyCash, Rupeeslam, CashFree, mPokket, RupeeFund etc.

Such unauthorised lenders will not check your CIBIL score, they will be eager to transfer money to your account without taking into account your credit worthiness. Such lenders will not provide the name of the company in their loan app, will be filled with vagueness and not transparent at all. One way of knowing a fraudulent app is that the link given through SMS by them to open the app will not have ‘https’ in its URL.

When the need for an instant loan arises, the emergent situation may overwhelm you to skip the thorough verification of the lender. However, it is of paramount importance that borrowers exercise caution before applying for an online personal loan with app-based lenders.

Before applying for an online loan, one needs to exercise prudence by knowing the lender well, checking the lender’s website and e-mail ID, checking whether they have a grievance redressal mechanism and whether the charges and penal interest charged for late repayment or prepayment are specifically mentioned in the loan agreement.

In case you have fallen prey or are victimised by lenders with their fraudulent lending apps, you need to make your voice heard. You can put up your complaint to the website www.onlinelegalindia.com so that your complaint is known throughout the world.

You can also report on unauthorised online lenders with fraudulent apps to the law enforcement agencies or through Sachet portal of RBI (https://sachet.rbi.org.in) to file an on-line complaint. Always remember that it is the duty of borrowers to remain watchful and only follow the best practices while opting for a loan via mobile loan apps.