Search for “personal loan apps” on the Google Playstore and you will come across hundreds of them offering instant personal loans with minimal documentation.
In times of personal financial crisis, we often turn to options that will give us instant access to money because, let us be honest, mainstream bank loan processing takes time. In contrast, these personal loan apps advertise themselves to offer instant access to money with minimal documentation and credit check.
The common eligibility criteria for such personal loan apps is that the borrower has to be within 21 to 58 years of age and have an AADHAAR and PAN number.
Surprisingly, bank statements or salary slips are optional. Even CIBIL requirements are very relaxed.
With these four minimal conditions, it is easier for any Indian citizen to get unsecured personal loans. However, the primary question is – are these instant personal loan apps on the Google Playstore legal?
Google Playstore Policies for Personal Loan Apps
In August 2019, Google cracked down on personal loan apps that were preying on unsuspecting borrowers by charging them exorbitantly high rates of interest and disbursing loans for a short period.
The Google Playstore developer policies were revised to prevent lenders from engaging in manipulative behaviour. In other words, the personal loan apps had to disclose lending information to get listed on the Google Playstore. Among compulsory information required for disclosure, the primary one was that these instant loan apps should not give credit for less than 60 days. Lending apps that require the borrower to repay within 60 days would not be listed on the Playstore.
This is where the irony lies because most of the personal loan apps on the Google Playstore offer a repayment period of 15-days maximum. These apps have been successful in maneuvering Google app development policies for their benefit.
As a result, unsuspecting Indian citizens download, install, share their data information, and get loans on these applications and find themselves on a losing streak because they end up paying higher processing fees and higher interest rates within a 15-day period. Situations become worse when people are unable to repay their loans and the people owning these personal loan apps resort to data breach and customer harassment for recovery. Since most of the personal loan companies are not licensed by the Reserve Bank of India (RBI), getting reprieve becomes difficult.
As a borrower, you have certain democratic rights that govern the financial transaction but if the financial transaction happened outside the purview of the governing body, the RBI, how can you protect yourself?!
Note – We are not implying that all the personal loan apps on the Google Playstore are illegal or a scam. However, you need to be careful and protect yourself when using any instant personal loan application.
Identifying Unlicensed Personal Loan Apps on the Google Playstore
We understand the need for urgent money. When you have bills to pay and are panicking, it is understandable that the need to check the credibility of the institution giving you instant money does not cross your mind.
However, to prevent financial complications later on, you must check whether the application giving you a short-term credit is legal or not. How can you do that?
Here are two foolproof ways.
#1 Check their license.
Non-banking lending institutions are categorised as Non-Banking Financial Companies (NBFCs) and to operate as a lending institution, they have to be licensed by the RBI as an NBFC. When visiting the website or checking the lending details on the application, look for the license number.
Simply stating that they are registered and regulated by the RBI is not enough. If the license number is not visible, visit this link from the RBI website which has an updated list of the registered NBFC. Download the file and search for the application name or the registered company name. If it is not there, do not take any kind of loan from that institution.
#2 Repayment tenure
Most of the unlicensed personal loan companies state on their website or the application that the repayment tenure is 60 to 120 days or sometimes more. However, when you create an account and you find yourself eligible for an instant personal loan, the repayment tenure is mentioned to be 15 days only.
It means that you have to repay the principal amount plus the interest, which can be around 1% or 1.5% per day, within 15 days and failure to do so would attract a higher penalty amount. If you come across any such personal loan app, avoid it at all costs. An interest of 1% or 1.5% per day amounts to around 365% to 547.5% interest in a year.
If you come across any RBI licensed NBFC operating a personal loan app on the Google Playstore, assume that it is safe to avail a personal loan from it. Borrowing money from a registered and licensed NBFC ensures that as a borrower, your rights and privacy is protected from any unfortunate incidents later on.