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5 Ways to Identify Fraudulent Personal Loans India

By Chanel Rick - Aug 2,2022
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“Hello, Mr. Jayesh! XYZ Bank would like to extend their welcome by offering you a 0% interest-free loan of ₹10,00,000. It’s easy and hassle-free with minimal documentation and zero verification checks. Just click on the link below to apply for your instant loan today! Offer valid for 24 hours only. Claim now!” 

If you link on this link, Mr. Jayesh, a scam awaits to unfold! The most enticing parts of the trap are its giveaway signs. Banks rarely offer loans without verification or interest for such a high amount. Whether it’s Mr. Jayesh or anyone else, we are all susceptible to the traps laid out by fraudsters. 

Unfortunately, the pandemic struck unexpectedly, and many households suffered the consequences of the nationwide lockdowns, along with company lay-offs and shutdowns. During unpredictable times, people began seeking additional sources of income or resources. Taking advantage of their desperation, hordes of scammers attempted to infiltrate homes by sending these shady but tempting messages and emails. 

Those who truly needed funds to finance urgent obligations fell into these traps and suffered its consequences. The urgency turns people blind to obvious signs of fraud. Educate yourself and your loved ones about the risks of engaging with such entities, applying for these loans or submitting documents. 

Occurrence of Personal Loan Scams in India 

In a detailed report of the RBI Working Group on digital lending, like lending via online websites and mobile apps, they mentioned the following. 

“As per the findings of the Working Group, there were approximately 1,100 lending apps available for Indian Android users across 80+ application stores (from January 01, 2021, to February 28, 2021)”. Adding further, “No. of App Stores in which Indian loan apps are available is 81, No. of unique Indian loan apps that have the keywords – loan, instant loan, quick loan, etc., is 1,100. No. of illegal loan apps is 600”. 

Isn’t this a scary reality? The government acknowledges the existence of these fraudulent apps! They’re working ceaselessly to prevent them from wrecking more homes in India. Here’s an exhibit of one such instance in India. 

In 2020, The Hyderabad Police encountered a massive money lending scam. They froze 75 bank accounts that held ₹423 Crores in connection to a common scam that involved apps which charge 35% interest on loans. A Series of scams were conducted through 30 non-RBI-approved mobile apps. They operated through firms based in Bengaluru, including call centres in Gurgaon and Hyderabad. The call centre had hired employees, most of whom were college graduates. They received payments between ₹10,000 and ₹15,000 per month.

While such incidents may frighten people, it’s crucial to generate higher awareness on these matters to prevent them from spreading further. The crime in these scams is not exorbitant interest rates. It’s the fact that they aren’t RBI approved, nor do they follow the mandated guidelines and regulations. These scams can continue harassing borrowers – even if they’ve paid the loan EMI! 

How to Identify Personal Loan Fraud 

Since these applications aren’t RBI-approved, they use hidden clauses in terms and conditions to gain access to phone books and other data. So, long after paying your dues, they may continue harassing you and your relatives or friends with relentless calls and abusive language or threats.

Another situation that could arise is loan defaults. These scams are often run by the same group. So, a borrower’s failure to make payments may lead to other loan scams approaching them. They may offer tempting personal loan schemes to pay off existing loans. 

Prevent yourself and your loved ones from falling prey to these vicious scams by learning the following red flags/signs to identify them. 

1. Upfront Loan Fees 

Processing fees are usually directly deducted from the loan amount disbursed. If the loan lender asks for upfront loan fee payments, don’t fall for those tricks! In most cases, financial institutions will not ask borrowers for any upfront payments or deposits before the loan transaction is completed. 

2. Zero Verification/Credit Checks 

Most well-reputed banks and lenders scrutinise your CIBIL score, credit history, and Income Tax (IT) returns before approving personal loans. If the lender assures you of no such criteria, it’s a massive red flag. Banks and lenders will always request documents like previous financial papers and other records to determine the interest rate. 

3. Limited Time Offers 

Scamsters use creative ways to pressurise customers, often using time sensitivity to persuade unsuspecting customers into applying for loans. Such lucrative offers might lure borrowers and corner them into going ahead with this. Though, that’s not necessary since personal loan offers don’t have such strict validities. 

This style of concerning or pursuing customers is a well-known technique used by fraudulent entities. And, it gives borrowers little time to think over the decision or conduct background checks on the lender. 

4. Unsecure Websites 

Platforms or websites without the signature padlock symbol are another giveaway. This confirms that the website is shady, and there may be potential for data theft. Hackers may infiltrate your private network or device. Make sure the padlock symbol is available on the URL to prevent data from being stolen. 

5. Instant Personal Loan Apps 

Fraudulent personal loan scams may operate via mobile apps to avoid having a physical or registered office. It allows borrowers to avail loans in exchange for high-interest rates – a detail often hidden within contract clauses. Fraudsters could employ complex schemes to swindle victims off amounts involving untraceable digital transactions. 

Technological advancements have benefitted all segments of society, including crimes and scams. With the help of digital modes and media, they have found ways to enter the loan market and persuade victims into sharing their data. Employ these tips to avoid falling prey to them! 

Looking for hassle-free and quick loans from legitimate companies? Visit Bajaj MARKETS for safe and secure online loans with easy verification criteria. 

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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522