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Back to Basics: Loan Scams & How to Identify Them

  • Highlights

  • Loan scam incidents have increased in India 

  • One must know how fraudsters target people in need of money 

  • Beware of the warning signs and red flags of a loan scam

According to a recent study conducted in March 2021, banks and financial institutes in India reported as many as 45,615 cases of loan fraud, worth Rs 5 trillion! While these numbers present a shocking reality, what’s more alarming is that these cases of loan scams are on a steep rise during the current pandemic. Many households witnessing huge financial losses looked towards loans as a suitable option to revive their businesses or repay other loans like housing loans, etc. But fraudsters and scammers are taking advantage of this situation and robbing the hard-earned money of these people.

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How do Loan Scams work

Scammers target people who are in desperate need of money but are unable to get a loan due to their low credit score, poor credit history, or heavy debt. Once they find their victim, they share with them some fake loan documents (via email) and ask them to fill out a form, sharing all personal and confidential details of their bank account(s). They then use the victim’s information to hack their accounts and rob their money. 

How to Identify Loan Scams

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If you want to save yourself from financial loss and the stress that comes with it, you must know how to spot such scams right in time. Listed below are the warning signs to watch out for:

1. Not checking credit history: Any reputed lender will always check the credit history when offering a loan to make sure whether the borrower will be able to repay the loan amount on time or not. But fraudsters and scammers are not interested in knowing the credit history. So, if a lender guarantees you a loan without checking your payment history and other details like employment information, income, and education, you need to be very cautious as it could be a scam.

2. Upfront loan fee: Another red flag of a loan scam is when someone offers a loan and demands an upfront fee. Though personal loans involve a loan processing fee, it is deducted from the disbursement of the loan. In other words, it is covered by the loan itself. No financial institute will ever ask the borrower to deposit money without disbursing the loan. So be wary if someone demands an upfront loan fee for ‘processing’ or ‘paperwork’ as it could be a loan scam.

3. Pressure tactics: Know that legitimate lenders like Bajaj Finance will never pressurize you to take a loan immediately. If in any case you are being pressured to make the decision quickly or share personal information like bank account details or debit/credit card information, don’t fall for it. High-pressure tactics like the ‘loan offer will expire quickly’ or an ‘immediate deadline’ to sign a loan form is certainly a big red flag of a financial scam.

4. No proper information about the company: Lack of information about the lender is another sign of a potential loan scam. Remember that all legitimate companies and financial institutions that offer loans have an address and contact information on their website. If this information is not provided on the website, make sure you do thorough research about the lender before sharing any personal details with them.

While any of the above signs prompt immediate concern, you must also be suspicious of the loan offers on an email that has spelling errors, grammar, and punctuation mistakes. It is not just a clear sign of lack of professionalism, but also a big alert of a loan scam.

So next time you get a suspicious text, call, or a message offering a lucrative loan offer, don’t rush! Be vigilant, explore the red flags and warning signs and accept the loan offer only after you are fully convinced that it is from a legitimate lender.

Savdhaan Rahein. Safe Rahein.

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