6 Ways to Spot a Loan Scam

It is not easy to make funds available at all times to meet all the different needs of life. Everyone faces a financial crunch at some point in life and rely on financial lenders and instant loan apps to make ends meet. Individuals in India have an average debt of Rs 95,000, according to a report by Credit Suisse in 2019. Cybercriminals are taking advantage of this vulnerability and swindling people in different ways through phones and computers.

The financial frauds in the last few months have skyrocketed. Over a hundred apps have appeared on Google Play Store and Apple’s App Store offering loans and most of these apps show more than a million installations. Many lenders have been reported for frauds worth more than Rs 1.85 lakh crore by June 2020 compared to over Rs 71,500 crore in the previous fiscal, as per the RBI’s annual report for 2019-20. Having awareness about such scams can help you prevent them. You don’t want to fall prey to them.
 
How to check if a loan company is legitimate or fake? Here are a few ways that can help you spot potential personal loan frauds.

     Also Read: Points To Consider Before Taking A Loan
 

1. Availing Loans Without Verifying the Source

Financial institutions that demand money as the payment of processing or insurance without proper documentation and due diligence are not legitimate loan companies. Do not pay any money unless you verify the source. Some scammers will ask you for payment without giving you enough details about themselves and then cut off all contact and disappear.
 

2. No-credit-check Loans

If your lender is ready to offer you a loan without doing a credit check, it is a red flag. The rate of interest is based on your credit score. Legitimate loan companies want to know if you will be able to pay back the amount on time or not based on your payment history.
 

3. Forced to Act Immediately

In the case of personal loan frauds, you will receive limited time offers that force you to make quick decisions. Don’t fall for such tactics. Reputed lenders do not pose deadlines. They will first access your credit score and then will give you weeks, if not months, to decide whether you want to take a loan. If you are being pressured into making a quick decision for taking a loan, it is clearly a scam.

Also Read: Quick & Easy Guide to Financial Terms
 

4. They Ask for OTPs on a Phone Call

If someone calls you and asks you for your OTP, do not share it with them. This holds true not just for instant personal loans but also for any other service. Many people have received OTPs via SMS on their phones and then have been asked to share them on a phone call. Do not fall for this. Legitimate loan companies will never ask you for OTPs on a phone call.
 

5. Check Website Authenticity

Take a close look at the website address of the lender, if it is ‘http’ then it is not a secure website and is prone to scams. Accepting a loan from such a source means exposing your name, bank account details, including your passwords to burglars. The website address should have an ‘s’ at the end and should read as ‘https://’. Such websites are secure and shielded from scams.
 

6. The Legitimate Lender Never Calls First

This is another common way for bank loan fraud in India. The financial institution's representative will not contact you until you have initiated an application for a loan. Even if they call, it will be for pre-screening your loan application. The legitimate lender will only ask for information that is required for the loan to be processed further. Personal loan scammers, on the other hand, will ask for personal information such as your bank account number and a few other sensitive details.