June 25, 2024

By Ketki Jadhav

March 23, 2024 / Reading Duration: About 7 minutes

Discover How to Sidestep Digital Loan scams

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Personal loans, readily obtainable with a favourable credit rating, cater to various requirements. These include consolidating high-interest liabilities, furnishing emergency resources for unplanned expenditures, funding substantial purchases, compensating student’s tuition charges, encouraging business propositions, and more.

Personal loans’ accessibility has grown impressively due to the expansion of lending apps, surpassing the bank’s overall credit expansion by approximately 15% over the last year. While this access has triggered a worrying increase in loan scams, it’s crucial to vigilantly approach the situation and follow a detailed checklist that ensures your financial security when utilizing digital or instant loan applications.

Fraudsters posing as genuine lenders deploy assorted tactics to deceive individuals grappling with financial challenges, particularly targeting those people who have issues obtaining loans due to an adverse credit history. They usually adopt unethical strategies such as reaching out to vulnerable targets with messages and links, asserting that a loan has been allocated, and asking to access their contacts, gallery, location, and other data when the link is clicked on. This enables fraudsters to extract information from gullible individuals seeking loans. Not uncommonly, some frauds also include them asking for sensitive information like government IDs, bank details, OTPs and sometimes even soliciting an upfront fee for a loan that will never be allocated!

Therefore, borrowers need to stay wise about these scams and employ required precautions to shield their finances. Although this might seem intimidating, with a little prudence and research, you can avert becoming a victim of these unscrupulous schemes.

Here are a few pointers that can help you to identify a probable digital loan scam:

1. Lender requesting an advance fee for processing:

One prevalent type of loan scam entails the criminal seeking an upfront processing fee for an instant loan that eventually isn’t sanctioned. The victim is reassured of a loan approval but is instructed to disburse the processing fee beforehand. Once the fee is paid, the scammer vanishes with the cash.

It’s vital to know that genuine lenders don’t usually charge fees upfront, rather, processing fees are usually incorporated into the total loan amount or expected to be paid post-approval. In scenarios where the lender insists on an advance payment, it’s advisable to conduct online research to authenticate the lender’s validity before proceeding.

2. An unbelievably great loan offer:

Receiving an unsolicited proposition for a personal loan offering an unbelievably low interest rate when you are in dire need of funds could be a scam. Scammers usually ask for an upfront processing fee that is never reimbursed or solicit sharing of the OTP (One-Time Password), enabling them to extract funds from the victim’s account or credit card.

These fraudulent schemes are tailored to exploit people in desperate need of funds who are looking for rapid and effortless access to credit. It’s crucial to recognise that if an offer seems overly good to be true, it is likely to be duplicitous.

3. The lender approves loans without conducting a credit check:

A personal loan is a type of no-collateral lending. Hence, the borrower’s credit ranking significantly influences the personal loan’s approval. If a lender declares that they provide personal loans without assessing the credit score, be sure to exercise extra caution to avoid falling victim to these fraudulent practices.

4. Time-limited loan offer:

Time-limited offers are temporary promotions for loans that are valid only for a very brief period, and scammers often exploit these deals to target individuals in need of immediate funds. The scammers claim to offer discounted processing fees or flash deals on loans, creating a sense of urgency which might lead individuals to make impulsive decisions.

It’s crucial to understand that genuine lenders rarely offer such time-restricted deals. If a lender insists that the offer is only valid for a short duration, ensure you authenticate the lender before proceeding.

Here’s how you can dodge these digital loan scams:

1. Verify the lender’s authenticity:

Prior to applying for a personal loan, it’s important to confirm the lender’s credibility. Undertake online research to determine if the lender is registered with regulatory bodies such as the Reserve Bank of India (RBI) or the National Housing Bank (NHB). Also consider going through online reviews and ratings to check the lender’s standing.

2. Approach unsolicited loan offers with Caution:

Should you receive an unexpected loan offer, especially from an unfamiliar source when you have not voiced interest in a loan, tread carefully. Reputable lenders do not usually institute unsolicited loan offers. Be particularly cautious of offers that claim “no credit check reasoned” or are time-restricted.

3. Be vigilant about sharing personal or financial info:

Keep an eye out for phishing scams where fraudulent entities, posing as legitimate lenders, ask for sensitive details like bank-related information, PAN numbers, OTPs, etc. Never disclose your personal or financial information.

4. Do not pay upfront processing fees:

Authentic lenders do not demand upfront fees for loan processing. If asked to pay an advance fee for processing, it’s likely a scam.

5. Screen for hidden charges and fees:

Before submitting a loan application, meticulously review the terms and expenses including-“>

5. Look for concealed charges in the loan conditions:

It’s crucial to understand all the terms of the loan contract to discover any hidden expenses or penalties. Be certain you’re informed about all potential fees and the ramifications of a loan default.

6. Beware of unrealistic interest rates:

Keep an eye out for personal loans with unattainable interest rates. Always compare rates from different creditors to ensure you get a fair interest rate.

7. Utilize a loan EMI calculator:

It’s advisable to use a Personal Loan EMI Calculator before you start your digital loan application. This tool lets you estimate your monthly repayments, which will be based on the loan amount you want and the interest rate offered. This is a handy way to assess your monetary abilities and avoid too much debt.

The steps to take if you’re a victim of a digital loan scam:

If you end up being a victim of a digital loan scam, you need to act quickly to limit any potential damage. Start by changing your passwords right away, especially those for accounts that were accessed or compromised during the scam; make sure these new passwords are strong and unique.

Get in touch with your bank immediately, and particularly if the transaction happened recently, since they might be able to freeze your funds before the culprits have a chance to get them. It’s encouraged for you to report the fraudulent activity to the appropriate authorities, and it would be a good idea to take very clear screen grabs of any website interactions or text messages pertinent to the scam. Write a brief but accurate account of your contact with the fraudster, their website, and any unlawful activities associated with them. You can utilize the National Cyber Crime Reporting Portal to file your report online. Absolutely refrain from giving the scammer any further data or money, and cease all contact with them to avoid further victimization.

To wrap up:

Personal loan scams are potentially devastating to individuals’ financial health. Protect yourself from becoming a victim of these scams by observing the guidelines presented here. Be careful of unsolicited loan offers, do thorough research on lenders before you commit, and never share your personal or financial information lightly. By choosing to practice these protective measures, you’re ensuring a safe experience when securing a personal loan. This will keep you safe from financial harm caused by scammers.

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KETKI JADHAV has been a writer for PersonalFN since August 2021. She holds a MBA in Finance and has over seven years of experience in Retail Banking. Ketki specializes in writing about banking, insurance, personal finance, and mutual funds and has been doing so for more than three years.

Disclaimer: Securities market investments are filled with risks, so please examine all pertinent documents carefully before you invest.

This content is merely informational and isn’t intended to influence your financial decisions. It is not a recommendation for mutual funds or financial advice for the schemes mentioned above.