In today’s digital age, getting a loan is as easy as downloading an app. A few taps, a couple of permissions, and voilà — money lands in your account in minutes. But behind the convenience lies a hidden cost that millions of borrowers are unknowingly paying — their privacy.
The dark side of loan apps
Most loan applications ask for more than your basic information, specifically, loans that are unregulated or loosely regulated. Ask for full access to location, contacts, messages, call history, pictures, and your microphone. Borrowers are usually rash or desperate and give this access without reading the fine print.
But why do they ask for such personal information?
- To confirm creditworthiness when there is no authentic credit score available.
- To check SMS alerts to monitor your repayment behaviour.
- Some apps threaten to call family or friends to instill fear into defaulters.
- To sell or commit fraud with your information.
A ₹5,000 loan could straight up delete your entire online existence.
Real stories, real threats
In some instances, debt recovery agencies contacted borrowers’ family members or co-workers when borrowers didn’t make payments because they were being harassed. Some were even shamed on social media using their real images. This action is not only unethical, but is also illegal.
In Andhra Pradesh, one borrower’s wife’s morphed photo was circulated by loan app agents following which the man ended his life.
Nithin Kamath also highlighted the menace of loan lending apps early this year by writing a post on X where he said that these finance apps are digital avatars of predatory moneylenders. “These loan apps harass people by calling all their contacts and sharing private photos and lewd pictures that are morphed,” he wrote.
What the RBI is doing
Reserve Bank of India on May 8, 2025 released a set of guidelines for digital lending preventing these apps from accessing mobile phone resources such as file and media, contact list, call logs, telephony functions, etc.
“A one-time access can be taken for camera, microphone, location or any other facility necessary for the purpose of on-boarding/ KYC requirements only, with the explicit consent of the borrower,” reads the guidelines.
The RBI directions also give an option to the borrower to deny consent to sharing of specific data.
Mukesh Pandey, Director of Rupyaa Paisa, says Borrowers must also be able to withdraw their consent, restrict sharing, or delete the data. I recommend that users be vigilant: download apps only from reputable sources, attentive to app permissions, and ensure that the lending platform is RBI -licensed.”
Despite these efforts, illegal app stores and online ads remain breeding grounds for shady practices.
Vinay Kumar Singh, co-founder, Olyv, told Livemint recently that their company analyses the data of consumers and their online behaviour to make predictions of whether the borrower would repay the loan or default.
What kind of personal data do fintech loan apps ask for and why?
When users apply for loans through fintech apps, they’re often asked to share extensive personal data:
- SMS and call history: Claimed to verify salary credits or EMIs, this data is also quietly used to assess creditworthiness via opaque algorithms.
- Contact list: Ostensibly for fraud prevention or alternate contact in case of default, access to contacts can also enable harassment or unauthorized data sharing.
- Device and app metadata: Information like installed apps, battery status, and storage is used to detect security risks or build behavioral credit profiles.
- PAN, Aadhaar, and banking details: While necessary for KYC and disbursal, many apps fail to disclose how this sensitive data is stored, encrypted, or shared with third parties.
Though some of this data aids underwriting and fraud detection, the lack of transparency, informed consent, and clear data retention policies raises serious privacy concerns. For many users, small loans come at the hidden cost of significant personal data exposure.
How can you protect yourself?
- Think before you install: If a loan application is asking for access to read your SMS, your contacts, or to access your location for no apparent reason, that’s a huge red flag.
- Use only RBI listed lenders: Check whether the app you want to borrow from is linked or partnered with a Bank or an NBFC. Don’t use it if it isn’t discoverable on the RBI website.
- Consider app reviews – past stars: Explore the latest reviews. Look for red flags including aggressive recovery, harassment, or misuse of the app’s users data.
- Use permission managers: Manage app permissions on Android via Settings > Apps > Permissions. Remove anything you don’t need; you don’t need your messages or image gallery as part of your credit file.
- Avoid sending sensitive data via either WhatsApp or SMS: If an application has collected your SMS data, they may still be able to use backdoor APIs or leaked data to track your activities, even after you delete the app.
- Report misuse: If you’re being harassed or if your data is being misused, file a complaint with the RBI’s Digital Lending Grievance Portal, or contact cybercrime.gov.in.
Your data is your wealth
In a world where data is currency, don’t give away your most valuable asset for a quick cash fix. Always ask: Is this loan worth the loss of my digital privacy?
The best protection is awareness. Don’t let urgency cloud your judgment. Choose apps wisely, read the fine print, and take control of your data — before it controls you.