Avoid A Personal Loan Scam With These 5 Warning Signs

With the growing demand for personal loans, the possibility of scams is also rising in India. While personal loans are convenient for anyone, these scams can be frightening. In the fiscal year of 2018, India experienced 55% fraud in personal loans. The statistics rose to 90% in 2019.

Scammers mainly use three types of modes to convince people to get a personal loan from them.

● Fraudulent lenders use fake representative agencies to convince borrowers. They even use the names of government policies such as “Pradhan Mantri Mudra Yojana” to sound authentic.

● Another way of these frauds is the use of forged identities. Any novice person can fall for these fake identities. For example, they might claim different names and give phoney information about their designation, such as the manager of SBI.

● Instant personal loan frauds are rising excessively since many banks offer online loan application options. The scammers use fake calls, SMSes, and even fake links. They also use various types of loan apps to access the target’s personal documents by launching malware into their phones.

Warning Signs for Personal Loan Scams

That said, it is easy to conclude that these scammers are incredibly clever and set their targets based on different criteria. They tend to fulfil their aim by exploiting people’s needs and vulnerability. Anyone can easily fall into their trap if they are unaware of these scams. However, there is always some warning sign, and you can easily avoid these scams by being careful.

Before you consider taking a personal loan, let’s learn more about these scams and how to avoid them.

1. Pay in Advance

The most common type of scam regarding personal loans is where the fraudulent lenders demand an advance payment. They will ask for a kind of advance fee and will promise you to approve a highly complex one in exchange for a charge. These scams are done by fake loan brokers who prey on easy targets. For example, if you are in desperate need of money, you might fall into their trap since they exploit people’s vulnerability.

Reality: If you are eligible for a loan from a genuine lender, they will never ask for any money. Before receiving any money from a lender, you must not comply with the scammers. The charges are applicable after the loan is processed. Remember, no one can sanction a loan without following the RBI regulations, so they cannot pass a legitimate loan even if you pay their fee.

2. No Documentation

‘No documents required’ might seem tempting to any potential borrower, which is exactly what the scammers want. They want their offers to be appealing. People fall into this trap by thinking they will be free from the hassle of the documentation procedure. They will offer you an instant loan without documentation and ask for a return charge. This is what the scammers want you to feel.

Reality: First, remember that the documentation process is for your safety and security. The bank or the financing sector will need your data to confirm your identity to ensure their money is safe with you. This is also to see if you would be able to pay the personal loan interest rates or not!

3. Unsolicited Information

Personal loan scammers tend to give more information than required. Watch out for that. They might provide overwhelming details and make you feel stunned, so you quickly step into their plan without much delay. These scammers offer loads of unnecessary data; if you listen closely, you will notice a discrepancy in their words. They will provide misleading information to convince you.

Reality: A genuine lender or loan agent will answer your queries and ask open-ended questions to understand your needs to find the best personal loan. They will make you informed, not overwhelmed by excessive information.

4. No CIBIL Score/ Credit Score Needed

You still have a neutral credit score even if you have never had a credit history or never got a loan. Thus, your credit or CIBIL score will always be required to pass a loan. Your CIBIL score is necessary since the RBI circular mandates it for any borrower who must comply. So, when a person tells you there is no need for a credit score and they will arrange you a loan without it, they are indeed bluffing. Beware of such people.

Reality: There is no way to get a personal loan without a CIBIL score or a credit report. If you are worried about having a low credit score, read more on how to improve it and the legitimate possible options to get a loan with it! You need to submit it to get a loan approved.

5. Online Loan Scams/ Loan Apps

Fake loan apps are available to download that promise lucrative loan offers. The most common way these apps target potential borrowers is by offering instant loans at low-interest rates. Since the personal loan interest rates tend to be on the higher side and loans take a few days to get approved, people sign up for such apps.

Reality: Any loan will require a minimum period to get approved. Have patience, and do not fall for these scammers if they guarantee instant money transfers to your account. They will take your money by fraudulent means, such as phishing schemes, once they have your account information.

So, trust only reliable financial institutions like Clix Capital that offer easy personal loans with no collateral and minimum documentation, ensuring a hassle-free loan experience.