What happens if you don't repay a loan app?
The answer depends on one thing: whether the app is backed by an RBI-regulated lender or not. Find that out first, because the right move is completely different.
By Aniket Sanduja · 6 minute read · Updated 28 September 2026
First, check whether the app's lender is RBI regulated. It takes five minutes. Then read the column that applies to you.
| RBI-regulated lender (bank or NBFC) | Illegal / unregistered app | |
|---|---|---|
| Do you owe the money? | Yes: principal plus the interest and fees shown in your Key Fact Statement | You received real money, so repay what you actually got if you can. The inflated interest and "penalties" are not something a court is likely to enforce |
| Credit score | Missed payments are reported to credit bureaus and lower your score for years | Cannot report you; it is not a bureau member |
| Recovery | Reminder calls, then recovery agents bound by RBI's code of conduct | Threats, calls to your contacts, morphed photos: all crimes |
| Legal action | Can go to civil court or arbitration; a bounced cheque or auto-debit can lead to a separate case | Practically none; it would have to reveal itself to a court |
| What to do | Talk to the lender's grievance officer early and ask for a repayment plan | Follow the harassment steps and report it |
If the lender is regulated: what actually happens, in order
- Reminders and late feesYou'll get SMS, emails and calls. Late fees and penal charges apply as written in your loan agreement; RBI requires them to be reasonable and disclosed upfront, not compounded into interest.
- Credit bureau reportingAfter a payment is 30 days late, it usually shows on your credit report. At 90 days the loan is typically classed as a non-performing asset, which hurts your score badly and makes future loans harder and costlier.
- Recovery agentsThe lender may pass the account to a recovery agency. Agents must identify themselves and the lender, may only contact you between 8 am and 7 pm, and may not threaten, abuse, shame you publicly, or contact your friends and relatives about the debt.
- Legal notice and civil caseFor larger amounts a lender may send a legal notice, then file a civil suit or start arbitration. If you signed a cheque or auto-debit mandate that bounces, the lender can also file a separate case for that.
Settlement: useful, but read this first
A lender may offer a "one-time settlement" for less than you owe. It ends the calls, but your credit report will show the loan as settled, not closed, and many lenders treat "settled" as a warning for years. If you can manage it, a restructured repayment plan that ends in full closure is better for your future. Whatever you agree, get it in writing on the lender's letterhead, pay only into the lender's official account (never an agent's UPI), and collect a No Dues Certificate at the end.
Your rights if an agent crosses the line
- Complain in writing to the lender's grievance officer, whose name and contact must be on its website and in the app.
- If there is no reply within 30 days, or you're not satisfied, complain to the RBI Ombudsman at cms.rbi.org.in. It is free.
- If you're threatened or abused, that is a police matter: call 1930 or go to your local station.
If you cannot pay this month, don't hide. Contact the lender before the due date, explain what changed (job loss, illness), and ask for a short deferment or smaller instalments. Lenders agree to this far more often when you come to them first.
Getting out for good
Most people end up in loan-app debt because a small expense arrived with no cash to meet it. Once this loan is dealt with, start a small emergency fund, even ₹500 a month. If you own gold and need cash, a bank gold loan is usually far cheaper than any app.
Questions people ask
Can I be arrested for not repaying a loan app?
Not for simply being unable to repay. Loan default is a civil matter. Criminal cases arise only in specific situations, such as a bounced cheque you issued, or if you borrowed with fake documents intending never to repay. Threats of arrest over WhatsApp are a pressure tactic.
The app says it has filed a case and sent a 'legal notice' on WhatsApp. What should I do?
Real legal notices come from an identifiable lawyer or lender, in writing, with the lender's name and your loan account details. Ask for it by post or email. Fake notices with court or police logos on WhatsApp are common; save them as evidence of harassment.
Will it affect my CIBIL score if the app was illegal?
Illegal apps are not members of credit bureaus, so they cannot report you. If a real lender's name appears on your credit report against a loan you don't recognise, dispute it with the credit bureau.
Should I take another loan to repay this one?
No. That is how a ₹5,000 loan turns into lakhs across several apps. If you must borrow, use the cheapest regulated option: an employer advance, EPF, a gold loan from a bank, or family with a written note.