5 Tips To Protect Yourself From Personal Loan Scams

As the number of digital lenders and demand for personal loans grow, so do the scams. Here’s how you can protect yourself from online loan scams by conducting these basic checks.
Personal Loan,
Digital Lenders
Personal Loan, Scams, Digital Lenders

In the first 11 months of FY24, the personal loan portfolio of banks grew by nearly Rs 11 lakh crore to Rs 52.7 lakh crore, according to the latest monthly data released by Reserve Bank of India (RBI). So there is huge demand for loan, which can be cashed out by non-banking lenders, too.

However, with the proliferation of online lending platforms, personal loan scams have also become very common in India. Scamsters are employing various tactics to deceive credit seekers, including asking for security deposit in lieu of extending a personal loan. But unsuspecting borrowers should not fall victim to such scams.

So, here’s a guide on how best to avoid such personal loan scams.

Recognise Basic Red Flags

Personal loan scamsters often lure victims with promises of quick and easy funds, and offer unrealistic rates of interest. If they are asking for upfront fees, and guarantee you approvals without checks on your credit history, then understand that it is most probably a scam.

As such, one such exercise caution where such tactics are used to extend credit in the form of a loan. As a rule of thumb, be cautious of unexpected offers or unsolicited calls, emails or letters from lenders.

Basic Precautions

Avoid disclosing personal information or giving security deposits or any money upfront to lenders, as legitimate lenders do not typically ask for such payments. A reputable lender will always provide clear explanations of all the terms and fees of the loan before you submit your application. It will also disclose the same on its website.

Also, verify the lender’s registration status with RBI as a non-banking financial company (NBFC) or any other recognised entity. See if details like the Company Identification Number (CIN) and Certificate of Registration (CoR) are displayed on the lender’s website, and cross-check the same on the RBI website, too. Only deal with licensed lenders who have a positive reputation.

Research Lenders

Conduct research on the lender’s reputation by seeking customer feedbacks or reviews on online platforms, and also review their websites’ way of disclosing information.

Genuine lenders will clearly outline a grievance redressal process on their website and will be prompt and professional in their customer support. Positive and negative reviews from previous borrowers of that lender will provide a balanced view of its services.

Compare Loan Terms

Never settle for the first loan offer that you get. Take your time to compare the rate of interest, terms of the loan, and fees of various lenders, before committing to any loan offer.

The banks where you hold deposits or salary accounts can likely give you better deals in terms of rates of interest and fee. Approach them for quotes and then using that as benchmark, do further comparisons on the rate of interest being offered. Always check for any hidden clauses or hidden charges when comparing rates.

Be Cautious Of Common Tactics

Beware of quick exclusive deals being marketed as being offered to a few. Stay clear of any offer where the lender tries to lure you with baits such as “if you don’t apply immediately, the offer would expire”. These are nothing but spiels to create a sense of urgency and lure you into taking the loan without checking on all the conditions and facts.

Another common tactic is where lenders would tell you that applying for loans elsewhere could harm your credit score. Credit checks from lender inquiries are spaced out within a specific timeframe.

Reporting Scams

If you fall victim to a personal loan scam, report it immediately to the National Cyber Crime Portal. You can report it online or dial the National Cyber Crime Helpline. Provide comprehensive details and any supporting evidence to aid in the investigations.

Also consider filing a complaint at the nearest police station to improve your chances of recovering the money and prevent others from falling into the scam.

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