Money lending apps are still a somewhat recent development of online banking services, however, they are gaining popularity at an impressive rate. At this point, approx. 10 new money lending apps appear on the Apple Store and Google PlayStore every year, most of which gain a large userbase in the first 2-3 months.
In order to understand why online lending apps are becoming so popular, it is important to look at what they do differently when compared to banks and other traditional lenders. Money lending apps are a new market that is not yet properly regulated by the government. This gives them much more freedom than banks, but also makes it possible for their parent companies to scam individuals who are looking to borrow money,
A New Way to Borrow Money That Doesn’t Involve Credit Score Checks
One of the most appealing things when it comes to money lending apps is the fact that some of them do not perform credit checks when reviewing a loan application. While this is only limited to small loans and is meant to streamline the application and approval process, it can be advantageous to individuals who have low credit ratings. Money lending apps are often the go-to solution for people who have applied for a bank loan and have been refused.
However, there is another advantage to using these apps. Money lending applications do not regularly submit their activity registers to credit agencies. This means that many of the loans that individuals get are not recorded on their credit file. Generally speaking, this can enable users to get as many micro-loans as they want, as often as they need, without having to worry that the recurring debt will cause their credit score to drop.
Furthermore, an individual’s online loans do not usually count when regular lenders such as banks establish his credit rating, making it easier to borrow money from multiple sources. It is also important to keep in mind that, due to the nature of money lending apps, the money borrowed only shows up on bank statements as regular transfers. Some apps even give users the option of borrowing money and having it transferred to their PayPal accounts, so banks are not always involved in the process.
An Unregulated Industry Can Be Dangerous
Unfortunately, the fact that money lending apps are still largely unregulated means that they operate in a legal grey area. The apps are considered only tools that individuals can use to borrow money. The parent companies of the apps are, in fact, the lenders. In most cases, these are large, multi-national companies that use the loans as another source of profit.
The main issue with this is the fact that the lending agreements that companies offer through lending apps do not tend to follow the same pattern. For example, some apps add different preset early repayment fees, depending on the amount of money that has been borrowed, while others set the fee depending on how early the loan is repaid. There are also companies that have advertised loans with certain fixed interest rates, only to reserve the right to change that rate as they see fit.
While borrowing money from money lending apps is not illegal and should not be avoided, the amount of freedom that these companies have makes it important to do a lot of research before applying for a loan. Furthermore, it is important to read the user agreements thoroughly as some companies will collect personal data and sell it if borrowers are late with their monthly repayments.