PERSONAL LOAN SCAMS IN INDIA AND HOW TO AVOID THEM

We live in a digital world where a personal loan is just a few taps away. Be it for an emergency, a personal goal, or any other purpose, there are tons of digital lending apps that make it quick and easy to access funds. However, one should know that this convenience comes with an invisible cost.

With a high demand for credit growth and the presence of instant loan apps, there has been a huge rise in cases of loan fraud in the last few years. If you are considering personal loan options, then you need to know about the common personal loan scams in India and how you can avoid them. Knowing how to protect yourself from personal loan scams will keep your finances safe.

How Does a Personal Loan Scam Work?

Many fraudsters present themselves as genuine lenders and have people in their target audience who urgently need credit but have poor credit scores. They send text messages, emails, and even reach out with enticing offers through social media channels, claiming to provide immediate loan approvals. Generally, in these messages, there are malicious links, or they ask you to download dubious apps.

All it requires is that once you click on the link, or give them access to sensitive data such as contacts, photos, and location. In some scams, you may be asked to share the details of your Aadhaar or PAN number, bank account details, or OTPs. Apart from this, there may also be an upfront processing fee for a loan that will never get processed. These methods are formed either to scam you directly or to use your personal data for further fraudulent activities.

Common types of personal loan scams in India:

Demand for Advance Payments:

A very common personal loan scam asks for an upfront fee. The lenders might have told you that the fee is for processing, insurance, verification, or for some other reason. However, after you pay this upfront fee, the lender will disappear. The authentic lenders mostly deduct the processing fees from the loan amount itself or collect them post-approval. There is always a chance for fraud in requests for advance payments.

Unrealistic Offers:

First of all, if the lender is offering options that seem too good to be true, like low interest, instant approval, or no documentation, then something must be fishy. If, even with a poor credit record, you are being offered such options, then cross-check the authenticity of the lenders. These types of lenders target poor credit scores and high urgencies for funds.

No Credit Checks:

Genuine financial institutions give strong priority to your credit score before offering any unsecured loan. If a certain lender skips due diligence, then there is a high probability of fraud. You can get scammed if you proceed with such offers.

Limited Time Deals:

Scammers often try to persuade victims by saying that the given loan offers are for a limited period. This urgency makes the borrowers quickly make decisions without rational thinking. The authentic lenders generally do not provide any such time-restricted offers.

Unverified contact methods:

The fraudsters try to mimic the official contacts but actually use unofficial email addresses, personal WhatsApp numbers, or generic SMS messages. Communication channels are always verified in case of authentic lenders.

How to avoid Personal Loan Scams?

Check the Authenticity of the Lender:

It is always necessary to verify the genuineness of the lending platform before processing a loan application. It should be registered with the Reserve Bank of India or any other regulatory authority. The official website, customer reviews, and verified office address and contact information are some ways to authenticate.

Double Check the Unsolicited Loan Offers:

If you're getting a loan offer out of nowhere, especially when you haven’t applied, you're supposed to double-check it. Genuine lenders seldom approach customers this way & unless you have an exceptional credit score, staying aware of whether they are ready to give you loans without proper documentation is necessary.

Never Share Sensitive Information:

Do not disclose personal and financial information, including Aadhar, PAN, bank account details, and OTPs. Scammers generally pose as bank officials or customer care operators in order to collect this information.

Never pay any amount upfront:

An authentic money lender will not charge any processing fee before loan disbursement. In case the lender is asking for any sort of upfront fee, you must stay away.

Avoid Unrealistic Interest Rates:

Check the offered interest rate against the market rates. If it is very low, it may be a bait to trap you into some fraud. Genuine lenders provide competitive rates depending on your credit profile, not on vague promises.

Conclusion:

With the presence of digital lending, access to funds is easier than ever. However, it also makes you responsible for more informed decision-making. You must stay alert and follow the given precautions to safely tread the path of online lending.