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How to Avoid Personal Loan Scams?

December 30, 2023 • 1415 views

For meeting any emergency fund requirements, a Personal Loan is an indispensable financial lifeline. However, Personal Loan scams are also on the rise. As a smart individual, you must stay alert and protect yourself from these scams. Here are the 7 signs of potential Personal Loan scams and how to identify and avoid them. Read on!

7 Signs to Spot Personal Loan Scams 

Here are the 7 signs to identify Personal Loan scams in India: 

1. Credit Check: Reputable lenders check your credit score before approval. If a lender does not go for a credit check, it is likely a scam. 

2. Advance Payment: Legitimate lenders do not charge a substantial upfront fee for a loan. If a lender asks for an advance payment, it is a scam. 

3. Unusual Communication Channels: Reputable lenders communicate through professional channels, such as email or letters inviting you to apply. Step back immediately if a lender contacts you through cold calls, text messages, or social media. 

4. Absence of a Physical Address: Authentic lenders have a physical office address you can visit. If a lender does not have one, it is likely an online loan scam. 

5. Pressure to Decide: Reputable lenders do not pressure you to decide about a loan quickly. If a lender pressures you to apply for a loan immediately, stay away! 

6. Suspicious E-mails and Websites: Legitimate lenders have professional websites and emails. A lender's website or email is likely a scam if it contains grammatical errors, typos, or an obscure domain name. 

7. Lack of Security on the Website: Reputable lenders have secure websites that use encryption to protect your personal information. If a lender's website does not have a padlock symbol next to the address bar, stop!

Examples of Personal Loan Scam

Scammers send Personal Loan fraud messages to customers. Here are a few examples of such scam messages:  

  • "Dear [Recipient], Good news! You've been selected for a special 0% interest loan of Rs.4,00,000. No paperwork is needed! Click now to claim your pre-approved offer. Limited time only!" 
  • "Greetings from [Bank or NBFC]! You're eligible for an Rs.2,50,000 interest-free loan. There are no hassles, just a one-time processing fee of Rs.8,000. Act fast—the offer expires tonight!" 

How to Prevent Personal Loan Scams?

Avoid Personal Loan scams and protect your finances with these precautions:

  • Verify Lender Credentials: Confirm the lender's accreditation with regulatory bodies like the Reserve Bank of India. Validate contact details, review client feedback, and examine loan terms on the official website. 
  • Use Secure Networks: Apply for loans online on secure networks and websites. Stay alert about phishing attempts to protect your personal and financial information. 
  • Avoid High-pressure Tactics: Fraud lenders often use aggressive tactics and pressure to make quick decisions without comprehending the loan terms. 
  • Examine Loan Agreements: Scrutinize all aspects of loan agreements, including interest rates and fees. Seek clarification from the lender on any unclear clauses. 
  • Seek Legal Advice: Consult legal professionals to thoroughly understand loan terms and conditions and verify the lender's legitimacy. 
  • Watch for Upfront Costs: Beware of lenders requesting upfront fees. Legitimate lenders typically deduct charges from the loan amount. 
  • Check Personal Information: Confirm the accuracy of shared personal data and monitor credit reports regularly for discrepancies or fraudulent activity. 

Also Read - Different Types Of Personal Loans In India

How to Overcome a Personal Loan Scam?

If you find yourself involved in a Personal Loan scam, here are the steps to follow:

1. Contact the Companies Involved

If you have already paid the scammer, contact the lender and request the cancellation of the fraudulent transaction.

2. File a Police Report

If you cannot detect the scammer after making a transaction, visit the local police station and file a police report. Make sure to keep a copy of the report as proof. Also, it should be reported on the National Cyber Crime Portal. You can report it online or contact the National Cyber Crime Helpline at 1930.

3. Monitor Your Credit

If your financial information is compromised, monitor your credit report for fraud activity. It would be best to raise a fraud alert on your credit report, informing creditors about the fraud. In a credit inquiry, the lenders must contact and verify the identity before approving the request.

Also Read - What is Personal Loan? Things You Should Know

To Conclude

It is essential to identify Personal Loan scams to protect yourself from financial pitfalls. You can safeguard yourself from financial pitfalls by recognising red flags like unsolicited offers, no credit checks, and pressure tactics. When choosing a lender, prioritise transparency, flexible terms, and trusted reputations. Remember, vigilance is your best defense against Personal Loan scams.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Personal Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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