scorecardresearchLoan frauds: How to identify and avoid them?

Loan frauds: How to identify and avoid them?

Updated: 31 Dec 2022, 10:09 AM IST
TL;DR.
Lack of financial readiness makes one more susceptible to loan fraud. Here are some common techniques to identify loan frauds and ways to avoid them.
Many people's lack of financial readiness has made them more susceptible to loan fraud.

Many people's lack of financial readiness has made them more susceptible to loan fraud.

The number of scams and fraudulent operations targeting internet and smartphone users in India has been increasing with a rising number of digital consumers. Often, elderly and the financially uneducated fall prey to scams.

Lack of financial readiness makes one more susceptible to such fraud. Fraudsters frequently take advantage of one's vulnerable position to offer fraudulent loans under the guise of quick and easy funding with no paperwork.

In this article, we will discuss some common techniques to identify loan fraud and ways to avoid them.

How to identify loan frauds?

Upfront loan processing charges

If the individual providing you with a personal loan wants an upfront loan charge, it should be a point of concern for you. Any personal loan will include a loan processing fee, however, this price is usually subtracted from the actual amount disbursed.

Financial institutions will never want an advance payment from a consumer before even disbursing the loan. The first sign that a loan is a scam should be whether it includes such a demand. If you are being given a loan with such a requirement, you should not accept it.

Unsolicited communication

Fraudsters occasionally contact people via phone calls, SMS, emails, and WhatsApp promising them fast cash through zero-percent loans. Such emails and communications may lead you to assume that you will automatically be approved for a loan without meeting any requirements.

But it's wise to keep in mind that companies usually will not contact you or send you unsolicited mail to obtain your private financial and personal information for loan offers.

Ignoring credit record

Any reputable lender will always analyse the borrower's credit history before approving a loan to see if they can count on them to make their payments on time or not. However, credit history is not something that fraudsters and con artists are concerned about. Therefore, you should be extremely wary if a lender promises you a loan without reviewing your credit record and other factors like employment information, income, and education.

Forcing high-pressure decisions

You should be aware that reputable lenders will never put pressure on you to accept a loan right away. Never give in to pressure to act fast or to divulge sensitive information, such as the password to your bank account or the details of your debit or credit card. High-pressure tactics, such as a loan offer that will soon expire or an impending deadline to sign a loan form, are unquestionably a major warning sign of financial fraud.

How to avoid falling prey to these frauds?

You can make sure that your loan experience is hassle-free and harassment-free by exercising due diligence while selecting the lender and keeping an eye out for any evident red signals. Your chances of selecting an untrustworthy lender are reduced the more you do your homework and cover all your bases.

Any sensitive information, such as your bank account number, card number, PIN, and OTP, should never be shared. Such a request over the phone, email, or SMS will never be made by your bank or other trustworthy financial institutions.

If you receive a call from someone claiming to be a representative of your bank, confirm their identification before continuing the conversation. After then, look out for the bank's official phone number on the bank's website. They'll be able to confirm whether or not the call was authentic.

Always remember that nothing comes for free, and if an offer seems too good to be true, it generally is. Before you sign anything, be cautious, resist the need to fall into strong feelings like fear or greed, and go over a simple fraud protection checklist.

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First Published: 31 Dec 2022, 10:09 AM IST