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YOU MUST BEWARE! 5 things to keep in mind before borrowing money from loan apps

There are only a few days left for the month, until payday, but you’ve used every penny in your account, maybe living the YOLO way. It’s just a matter of days, you don’t even need a massive loan, just enough to pay you monthly.

What would you do in this situation?

Asking family would make most of us buy into the importance of saving and make you look irresponsible. Friends? Hmm… it’s a bit awkward to ask and most of them wouldn’t be able to lend themselves. You look at your phone – the answer to all your problems.

LOAN APPLICATIONS, they are simple and instant. One touch and you download from the myriad of options like EarlySalary, One Cash, MoneyTap, Niro, etc, etc, etc…

One loan application kills another in Hyderabad. Representative photo: Creative Commons

You tap “Allow Access” to everything – your contacts, GALLERY, activity on your phone, EVERYTHING when you set up the app. Then you fill in the requested details, your Aadhaar, PAN, address, the amount you need (say Rs 5,000) and click apply. And There you go! You can see that your account is credited with Rs 5,000.

But an instant loan from apps has a catch; actually a lot of takes!

On April 18, 2022, Monday, a youth in Hyderabad, Telangana hanged himself to death. The reason? He was being harassed by loan app operators for payment of the Rs 12,000 loan he had borrowed. He had repaid Rs 4,000 through EMIs but had yet to repay the full amount. While he was ready to repay the loan, he did not expect the operators to call his friends and family and socially humiliate him.


Imagine your friends and family members, unbeknownst to you, receiving a call from loan app operators out of the blue, being asked to repay a loan you have taken out!

It is not the first time that a harassment case on an instant loan application has ended in suicide. There have been many reports over the years, especially during the pandemic period, of such cases. In some cases, loan applications harassed borrowers even after repaying the full amount. In other cases, operators have used transformed images of borrowers and people on their contact list to harass them.

So what do you need to know before borrowing on an instant loan app?



The interest rate of different loan applications varies from application to application. However, the rate is calculated per month, sometimes per week (if the loan amount is taken for a week) which continues to add up until it is paid off. Nevertheless, the interest rate is much higher than what banks offer on regular loans.

Some charge 12-36% interest on instant loans. So, if you take Rs 5,000:

  • An interest of 12% will be Rs 600. The amount to be repaid will be Rs 5,600.
  • 36% will be Rs 1,800, so the final amount due will be Rs 6,800.


Lending apps are also notorious for charging exorbitant processing and service fees. In a case of application Cash Advance Ha now prohibited, for a loan of Rs 6,000:

  • A processing fee of Rs 2,300 would be charged
  • The final amount disbursed would only be Rs 3,700
  • But you will have to repay Rs 6,000 plus interest

Loan apps also impose hefty daily penalties if you don’t repay an amount. So, you might end up paying for the apps way more than what you borrowed.


In one case, a man who had never borrowed on any loan app was harassed by loan app operators to repay an amount owed. Upon investigation, it was discovered that his neighbor had defaulted on the loan and the victim’s contact number was on his contact list.

In another case, a woman was harassed with her transformed photos to pay off a loan that one of her colleagues had borrowed.

The darker part of lending apps is when those apps – even those deemed “correct” – require access to the borrower’s contact list and gallery when downloading the app. This data is then used for harassment purposes. From the recent Hyderabad case to several other cases, loan app operators call random people from the borrower’s contact list, harassing them about the borrower’s loan.

They also use the borrower’s gallery photos to turn images into pornographic content and circulate the fake images in a defamation campaign.

So, before you click “allow access”, think again.


It does not matter if you took a loan from a loan app or even repaid the entire amount after taking the loan. Your worries won’t stop there; as in a number of cases, lending app operators have resorted to extortion and fraud using data stolen from borrowers’ phones. Borrowers were harassed to pay exorbitant sums that they had already repaid by lending app operators. In other cases, people downloaded a loan app but didn’t take out a loan and ended up deleting it from their phone, only to be harassed later to repay a loan they never got. contracted. The fault – data sharing!


Lending apps also share your data with several other similar companies or their own sister companies and trick you into getting more loans. People have been trapped into taking more loans and the cycle of debt. There have been cases where people have ended up repaying Rs 50,000 for a loan of Rs 20,000 with the interest rate, processing fees and penalties all adding up.


There are rules about how a debt collector should do debt collection. Most loan application collectors break the standards. So, if you are harassed by loan collectors, you should go to the police. Or you can also file a complaint with RBI Sachet Portal.

The best thing to do would be to avoid borrowing from such apps. But if you have to, check the app rating and reviews on Google Play Store or App Store; check if the NBFC (non-bank financial company) or the bank they are linked to is accredited by the RBI.

The RBI recently announced that it had found nearly 600 loan apps operating illegally in India and blocked 27 of these apps. So don’t end up borrowing from some illegal loan app, maybe ask your parents for that loan with a secondary rebuke.