A personal loan is a financing option that comes in handy to meet a variety of financial needs and goals, from funding your vacation to renovating your home. The best part about a personal loan is that it is quick to secure, requires minimal documentation, and needs no collateral. While these features are what makes a personal loan a handy solution in many financial situations and emergencies, there are several online scams that you need to be aware of revolving around personal loans. Here is what to keep in mind.

  • Be cautious of pre-approved loan offers

A lot of time, you may get pre-approved loan offers for a personal loan. Since the eligibility criteria for a personal loan is basic and it is an unsecured loan i.e., one that does not require collateral, it is easy to get a personal loan. However, unless the pre-approved loan offer is from a financial institution where you are an existing customer or from a verified lender, be cautious of the offer. 

There are many phishing scams online that aim to extract sensitive information from individuals under the pretense of a loan. Hence, you should be careful whenever you receive a pre-approved personal loan offer on your email ID, SMS, etc., that is from an unverified lender or a lender who is not reputable.

  • Don’t apply or agree to a loan without proper details

Nowadays there are many lending apps online that offer easy personal loans and then charge an exorbitant amount of interest on them. Some sketchy lenders might also use a range of unethical techniques to blackmail the borrowers into paying such interest.

Hence, before you agree to any terms, submit any documents, or sign anything, make sure you have all the required details clearly stated in official communication from the lender. This includes the rate of interest, the amount of the loan, the repayment tenure, penalties and charges, and other loan terms. In fact, most reputed lenders have a free online personal loan EMI calculator and personal loan eligibility calculator. These tools allow you to gain necessary information and clarity about your personal loan before you even apply for one. Make sure to use these tools to your advantage so you can make an informed decision.

  • Don’t click on unverified links

Whether you already have a personal loan or are in the process of applying for one, it is prudent to not click on unverified links. There are a lot of online scams where SMS and emails are sent out and scamsters pretend to be the lender and ask the customer to click on a link either to update their PAN or Aadhaar or provide some other sensitive information. 

You should never click on such links because no lender will ask you to provide such sensitive information without going through an official communication channel. Usually, these messages sent by scam artists have poor grammar, try to evoke a sense of urgency, and are not from an official number or email ID. 

  • Practice computer and mobile security

Make sure you don’t use public Wi-Fi when you log in to or apply for a loan online. Also ensure to log out when you are done and don’t leave the session active. Set strong passwords and do not write them down anywhere or share with anyone – no official bank representative will ever ask you for sensitive information like passwords and OTPs.  

Ending note

A personal loan allows you to instantly access funds online and use them for a range of purposes, from travel to medical emergencies. It’s best to apply for a personal loan with a reputable financial institution instead of falling for unverified lenders that offer loans on terms that seem too good to be true. And if you ever receive a message from your lender but you are unsure of its legitimacy, don’t act on it. Contact your lender and clarify before you take any action regarding the personal loan.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.