How to Identify & Avoid Personal Loan Scams - Know Here!

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03 JULY, 2023
A personal loan is the most preferred credit option as it allows you to meet your distinct non-speculative financial needs, such as education expenses, medical emergencies, and debt consolidation. The advent of digitalisation has simplified the process of obtaining instant loans, making it convenient for borrowers. However, digitalisation also brings its own set of risks, especially in the loan domain. Therefore, it is crucial for you to be well-versed about the different types of borrowing scams to identify and avoid them.
What are the different types of personal loan scams?
Fake lenders: Scammers create fake online lending platforms, posing as legitimate lenders. They attract borrowers with enticing offers, minimal documentation requirements, and low interest rates. They might request personal information or an upfront fee, which they later use for fraudulent activities.
Phishing scams: Scammers send forged text messages, emails, or make calls impersonating financial institutions, loan providers, or lenders. They extract sensitive financial and personal information, such as bank account details and credit card information, under the pretext of processing the loan application.
Advance fee fraud: Fraudsters ask loan seekers to pay a specific charge before processing the loan application. They often request payment via unconventional means like cryptocurrency or gift cards, making it difficult to reverse or trace the transaction.
Identity theft: Fraudsters may steal personal identification details, such as PAN card, Aadhaar card, and bank account information, to apply for credit in someone else's name. This can result in financial losses and damage to the victim's credibility.
How to identify and avoid personal loan scams?
Research and authenticate: Before hitting on the personal loan apply online option, thoroughly research the reputation and legitimacy of the lender. Ensure that the institution is registered with the Reserve Bank of India (RBI). Visit the RBI's website to find the names of all registered lenders for credibility verification.
Visit secure websites: Make sure the lender's website has secure encryption (https). Be cautious of text messages, unsolicited emails, or phone calls requesting financial or personal details. Legitimate lenders will not ask for sensitive information through these channels.
Payments and upfront fees: Legitimate lenders do not ask for upfront fees through unconventional means. Be skeptical if a lender asks you to pay any charges before loan approval, as this may be a scam. Genuine lenders usually deduct the charges from the loan proceeds disbursed to you.
Protect personal details: Avoid sharing financial or personal information unless you are confident about the lender's authenticity. Before applying for a personal loan, double-check the lender's credibility and the details they have provided. Only provide mandatory information and avoid sharing unnecessary details.
Conclusion
While digitalisation has revolutionised the lending space, it is crucial to remain informed and vigilant about various personal loan scams. By understanding different types of scams and taking preventive measures, such as researching lenders, authenticating their credibility, and protecting financial and personal details, you can safeguard yourself from falling prey to fraudulent activities. By following the cautious approach mentioned above, you can ensure a secure and safe borrowing experience.
Additionally, once you have selected a prudent and authentic lender, use an online personal loan EMI calculator to determine the suitable personal loan interest rate, EMI, and repayment tenure based on your affordability. Serving an affordable personal loan EMI will prevent you from falling into a debt trap in the future.
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