Personal Loan Scams and How You Can Avoid Them!

Borrowing money can be very easy nowadays to pay for your personal needs such as: buying a new house, starting a new venture, or any medical emergencies. However, the wide and easy availability of the personal loan can result in loan fraud. The question is; when exactly does the personal loan scam or fraud happen? The answer is very simple- these scams or frauds normally happen when the lender is dishonest and gives the wrong information to the borrower while providing the loan.

According to the data recorded, borrowers from Delhi, Haryana, and Uttar Pradesh are at the top of the list of fraudulent loan applicants. 

Well, we’ll be discussing the personal loan scam or fraud in this section. The reason behind the scams and how to avoid these scams? 

Types of Loan Fraud:

Personal loans are in demand as these loans are very easily available in the market by various lenders at competitive interest rates. There are many loan scams or frauds in India including Business and personal loan fraud:

1. Identity Fraud

In this type of fraud, the fraudsters steal the victim's personal information such as address, license, or date of birth to apply for loans in their names.

2. False Documentation

When a borrower uses a false bank statement, salary slips, or income tax returns to apply for loans.

3. Loan Flipping Strategy

Lenders sometimes encourage consumers to refinance or take out additional loans, potentially leading to higher fees and commissions, and in some cases, at interest rates that may be considered too high.

4. Pay-in-Advance Fraud

In this case, the lender or fraudsters demand advance fees from the applicants in return for that loan which they don't intend to provide to the borrower. 

5. False Loans

The fraudsters make false loan accounts in the name of non-existent borrowers to get personal loans from any lender or financial institution (banks or NBFCs) 

6. Coordination Between Lenders and Borrowers

Here in this type of fraud the lender and the borrower are on the same page to cheat the banks and other financial institutions by submitting false information or paperwork.

Interpreting Personal Loan Scams

• Don’t give any sensitive information like your bank account details, ATM card numbers, PIN, and OTP. Your bank or any legitimate financial institution will never ask for such information over a call, message, or email.
• If someone calls you and claims to be your bank’s representative, before continuing the conversation or giving the information, verify their identity. After verifying, check the bank’s official website and match the contact details of the bank. If the call was real, the calling person would be able to verify himself. 
• Don’t entertain anyone asking you for an immediate response to apply for the loan that they are offering.
• Don’t pay any upfront fee to get a loan faster in any case even if the lender is giving you the loan with the lowest interest rate.
• Before logging on to any financial institution’s website, make sure that it’s genuine too. Closely pay attention to the URL, and make sure that it’s secure (check: HTTPS, not just HTTP).

Ways to Avoid Personal Loan Scams or Fraud:

1. Investigate the lender's identity: 

Look for a genuine lender, and explore multiple lenders by researching to identify the one that aligns with your loan requirements. Visit the lender's official website to learn about the loan options.

2. Verify Loan Documentation:

Verifying loan paperwork is an important step in avoiding fraud. Borrowers should check loan agreements before signing them to ensure all terms and conditions are mentioned and clearly understood. Consumers must pay close attention to any information in the loan agreement form, including interest rates, repayment, and other factors.

3. Verifying Personal Data

A very important step to avoid loan fraud is verifying personal information. Any personal information that is given by applicants to lenders should be correct.

Before the process starts, verifying their identity, address proof, date of birth, and job information is very important. Check credit scores too, to ensure that there are no fake accounts registered in their name. Also be aware of the lender who asks for unnecessary information like social security number, password, and bank account details. usually, scammers use these personal information to steal their information.

4. Take Advice From A Legal Advisor

Borrowers must seek advice from legal advisors to ensure the lender's legitimacy and check the defaulter's history. 

A legal counsel also reviews the loan agreements, and their terms and conditions to look for any conditions that might harm borrowers. Also, a legal advisor may assist borrowers in understanding their legal rights and choices in case of problems with the lender.

Conclusion:

In India, people face fraud related to loans very frequently. Due to this reason, people have trust issues related to these financial supports.  As discussed above in the blog, a borrower must be aware of personal loan scams or fraud before applying for any loan service. A borrower must take precautions to prevent becoming a victim of the fraud. Keep complete track of the loan information from the verification of the genuine lender to document verification.

Loan fraud can be avoided just by keeping in mind the small things, being aware of loan fraud, and making people aware too for the same. Get your loan approved online and prevent yourself from personal loan scams. Apply personal loan online without worrying with My Mudra your trusted partner in hard times.

Also read: Get a Personal Loan Online in India