Digital loan apps lure people into debt trap by promising to give money in 5 minutes. If installments are missed, recovery agents threaten and harass them. These apps charge more than 25% interest and also misuse your personal data.
Imagine, the end of the month is coming. There are still a few days left for the salary to arrive. In the meantime, what will you do if suddenly any hospital expenses arise, the car breaks down, or you have to pay the credit card bill? As soon as you pick up the phone, you will see hundreds of apps making promises like ‘get money in 5 minutes’, ‘without paperwork, without waiting’. Sounds like a great solution. But, for thousands of Indians, these 5-minute loans have become a web of months-long mental stress and never-ending debt. Going deeper into the digital loan market, we find that the real story is not about the ease of getting money, but about the terrible incidents that happen if installments are missed.
scary experiences
See the experience of a 28 year old woman from Delhi. Last year he lost his job due to some changes in the company. As house rent and credit card bills increased, he took a loan of Rs 1 lakh from a digital lending app.
Initially the recovery agents used to call only once or twice a day. But within a week there was a flood of calls. Sometimes calls started coming every hour. She threatened that if the money was not returned, she would tell everyone in the family and the company where she worked. She could not bear this mental pressure and repaid the loan by borrowing money from friends. She says that the loan was not her biggest problem, but the fear behind it.
‘Expert Panel’, an organization that provides legal assistance in loan related matters, conducted a survey on 10,000 people in trouble, the results of which are similar. 72% of the people surveyed said that they faced harassment from recovery agents. 67% people received continuous calls from different numbers, while 11% people were directly threatened by agents coming to their homes or offices. 8% people also received threats of legal action.
Young generation trapped in debt trap
Among first-time loan takers, 41% are from Gen-Z i.e. the young generation. About 46% of these people take loans to buy gadgets like smartphones and laptops. At the same time, about 45% of the personal loan takers are Millennials, who borrow money for lifestyle expenses, home decoration or starting a small business.
Digital loans have provided money to those people who found it difficult to get loans from banks within minutes. But, getting money so fast often stops people from thinking about the risks associated with the loan.
When your phone becomes a weapon
A bigger danger than borrowing money is your personal information given to those apps. Most loan apps ask for access to your phone’s contacts, photos and media files. This may seem like a common practice, but experts warn that companies use it as a weapon to blackmail customers.
Always be wary of apps that charge exorbitant processing fees, offer repayment periods of only a week or two, or have annual interest rates that exceed 25%. Before downloading the app, it is very important to check whether it is run by a Reserve Bank of India (RBI) approved bank or NBFC or not.
Surveys show that while banks usually charge 10 to 20% interest, 45% of people using digital loans pay more than 25% interest annually. Some illegal apps charge interest up to hundreds of percent. This makes it almost impossible to repay the loan. Hidden processing charges and unclear terms and conditions make the situation worse.
Know your rights before taking a loan
Never assume that threatening to delay installment payment is part of recovery. Recovery agents have no legal right to threaten, abuse, or publicly humiliate customers. They cannot behave like police or court. If your personal data is misused or you are threatened, you can complain to the RBI Ombudsman. You can also contact cyber police in cases related to misuse of data. And the most important thing to remember is this: missing an EMI is not a criminal offence.