Here’s how not to fall for fake loan apps
India's 1.3 billion population has been on lockdown since 24 March, resulting in more than 100 million people losing their jobs in April alone. Ram was one amongst them, an engineer by profession who had EMI’s to pay, so he asked few of his friends to lend him money but he still was short by a few thousands. One of his relatives told him about an email he had received from Loan Rupee – Instant personal loan App listed on Google Playstore which could give him upto Rs 50,000 for a minimal subscription fee. Ram downloaded the app and applied for Rs 15,000 loan for a minimal fee, with an assurance the money will be credited to his account in 24 hours. But the money never came, nor did the refund of the fee.
Similarly, Damyanti too has been relying on lending apps to bail her out of financial emergencies with micro loans that she must repay before a week or fortnight is up. Such apps are hardly ideal, since they often involve high interest rates or ask for private data, but she didn't know of any other option. When the lockdown struck, she was approaching due dates on an accumulated loan of Rs. 20,000, therefore she paid a membership fee ranging between Rs 150-300 on nearly half a dozen apps like Billion Cash, GoCash, Yocloan, Cash King - Personal Rupee Loan Market, HappyLoan and Cash House to get a loan, without any success and lost all the membership fee as well.
The financial frauds have been on the rise in the last few years but there has been a significant increase during these uncertain times as there are job losses, and small business owners didn’t have enough cash reserves while the lockdown was going on.
India is flooded with scamming financial apps on Google Playstore and Appstore (there are almost dozens of such apps). These apps on the pretext of providing credit/loans charge an upfront application fee or membership fee ranging anywhere between INR 100 to INR 400. The user is then redirected to other apps to "apply. Many of the smaller lending apps don’t even have a website and are not even licensed therefore their authentication is impossible. Those who do, provide no information about the company. At best, there’s an email address and a phone number, which is not reachable when one contacts.
There are no exact figures for the number of Indians borrowing via digital means. But data from AppsFlyer showed India had the highest number of installs for lending apps in the Asia-Pacific region in 2020 so far. The venture capital tracking platform Traxcn reportedly estimates that there are 484 alternative lending apps – including genuine apps - currently operating in the country. More than a hundred apps are offering payday loans in India, and many of them show more than a million installs.
It’s been estimated 500,000 people have been scammed and scammers have made approx. 15+ Crores from these apps and numbers continue growing. The nos. are estimated on the basis there are 50 scam apps in the top 100 financial apps in the Google Playstore alone of which 20 scam apps exist as of now (they keep getting removed periodically basis the reviews received). Each app has between 1 lac to 1 crore app installs, averaging at 10 lacs per app. Each scam app offers a ‘fabulous easy loan’ for which you need to pay a small fee which is approx Rs 300.
These apps continue to flourish. Their modus operandi is simple -
1. You can put any data you want, they don't verify
2. There is a reference inside (ads) to other scam apps, so this is a network. In app notifications prompt you to download other similar apps
This has led to a huge trust deficit in the market. Genuine Fintech players are facing the heat because of consumer distrust. Therefore, we need to educate people on how to differentiate genuine cash loan apps from the fake ones. Some pointers that can help are -
Authentic apps do not charge ‘fees’ in advance
Authentic apps do not ask for any upfront fee, if they are asking then it is a clear warning sign that the lender is trying to cheat you. The ‘loan processing fee’ or a charge for their services, if applicable, is deducted from the loan amount itself. Check Playstore & Appstore reviews.
Look for the Physical address of the lender
Make sure there is a physical address of the lender, before going through with a personal loan application. If they do not have an address that you can find online, it’s is an indicator that they will disappear with your money and you will not be able to recover it.
Do not fall for pressure tactics
The genuine lenders will let you take time to decide before taking the loan and will not pressurize you to take up the offer. Pressure tactics are used by those who want to make quick money and do not have customers interest in mind.
Be alert against phone scammers
Phone scams are on rise, do not fall for it. Do not share your details with them, till you have verified all details about the company, as mentioned above. Look for their physical address, website, and profile of the founders. Any company offering loans in India must be registered in India.
No such thing as ‘guaranteed loans’
Loans are only disbursed after verification of your documents, therefore there is nothing called ‘guaranteed quick loans’. A lender who does not bother with verification and simply asks you to pay a small processing fee surely is a scamsters looking to dupe you.