Personal Loan Scams In India And How To Avoid Them

A personal loan can be a life saver in case someone falls short on money. Not only is a personal loan uncollateralized, it is also a quick and hassle-free way to get ready cash when one may be unable to meet an emergency expense like paying off a medical bill, getting some urgent home repairs done or paying off a child’s school fees.

However, like everything else, scamsters often try to cheat people who want to avail a personal loan.

This problem of frauds and scams has increased manifold following the COVID-19 pandemic, which resulted in a financial crisis for households across India, making it necessary for people to opt for personal loans.

Scammers have sought to take advantage of this unprecedented crisis and have been trying to rob people in distress of their hard-earned money. Therefore, it becomes absolutely essential for potential borrowers to remain alert and spot a scammer before they are hurt.

Here are a few signs that make it obvious that a personal loan being offered could be a scam.

Upfront Loan Fee:

If anyone offering a personal loan demands an upfront fee, that is usually a sure sign that the loan being offered is a scam. While all personal loans will certainly have a fee component, if it is higher than the fee generally being offered across the board by lenders, it should be a red flag.

Lenders automatically deduct the loan fee before the money is disbursed, and do not ask the customer to deposit any money as fee before the loan is disbursed. So, if a borrower is being asked to deposit money even before the loan has been disbursed, that is a red flag and a sign of a scam.

No Verification Of Credit History:

As personal loans are uncollateralized, banks and non-banking lenders run strict checks on the credit history and the credit score of the borrower. 

This is a thorough process, which all good lenders will undertake. So, if anyone offering a personal loan does not demand details of the borrower’s credit history or any existing loans and their repayment history, including any history of a past default, he could be a scamster looking to cheat.

Limited Period Offers:

Loans are mostly not offered as limited period deals that can expire after a short period. So, if a person is offering a loan scheme that he or she says will expire in a short time, that may be a sign of a scam.

Unsecure Website Links:

All good lenders will have an “HTTPS” site, and not merely an “HTTP” site. So, if the website is not on a secured server, a potential borrower should be very careful in dealing with such an entity. Good lenders offer a secured website so that there is no chance of online fraud. 

Interest Rate:

If the rate of interest being offered is absurdly lower than the prevailing rate in the market, one should take that as a sign of a potential scam and should be doubly sure of availing such a loan.

Documentation:

Good lenders will need some form of documentation from a borrower, to verify their antecedents and establish their creditworthiness. So, if someone offering a loan does not need any paperwork, it is a sign he or she is trying to pull off a scam.

Guaranteed Loans:

No lender of a good standing offers a guaranteed loan before checking and verifying all the details. So, if someone is offering guaranteed loans, it should be taken as a sign of a potential fraud.

Loan Apps:

Oftentimes scammers only have an online presence and no physical office. So, borrowers should be very careful while choosing a lender and, if in doubt, should make sure that they verify whether the lender has a physical presence or not.

Fine Print:

A customer must insist on going through the fine print of the loan agreement before agreeing to sign on the dotted line. If a lender does not offer a proper loan agreement with detailed fine print and all charges and interest rates, the borrower should seek more details and, if possible, avoid such a lender.

A borrower should go over the website of the lender and should thoroughly verify each and every detail mentioned therein.

Conclusion

In this world of instant loans, it is better to be careful than be sorry later. The world of online lending is infested with scamsters and fly-by-night operators as well as those looking to make a quick buck by offering loans, often by guile.

As a borrower, therefore, you have to be on guard and ensure that you are not taken for a ride and do not end up losing your money. It is, therefore, important to approach a reputed lender like IIFL Finance so that there is no risk of getting defrauded by any unscrupulous person acting as a lender. IIFL Finance provides personal loans after verifying the credit history and the required documentation through a secure digital process.