The thing about a growing economy is that there’s a rising demand for capital. This means loans, and this, in turn in, means fraudulent or unauthorised lenders. In fact, a majority of the illegal lending apps on Google’s Play Store are Chinese lenders that operate under the RBI’s radar and prey on the truly desperate, lending them large amounts of money with no collateral but at exorbitant interest rates.
Even the Finance Ministry and the RBI have taken cognisance of this situation and decided to create a ‘whitelist’ of lending apps that are sanctioned and authorised to offer loans, as an individual you need to do your best to avoid getting trapped by a personal loan scam. This handy guide can serve as your checklist for dodging such scenarios.
Most of these scamsters impersonate one of reputed financial institutions. Next, they offer you instant loan amounts with ‘minimal’ paperwork. Many of the fake lenders send a web link asking you to provide basic information to receive a ‘hassle-free’ loan with no verification on credit checks. After that, they just create a sense of urgency, asking you to hurry up or the offer will be revoked.
If it is too good to be true, it probably isn't.
Suppose you do end up taking a loan from one of these unauthorised lenders; the consequences could be many. Here are some things they all do:
Financial literacy is the key to observing some of the telling signs of personal loan fraud. Here are a few examples:
This is a myth. No reputed lender will risk their money by offering loans without checking your credit score and your ability to repay. There is a thorough verification that is conducted before a loan is sanctioned.
Poor language in written communication – Banks and other financial institutions are reputed for their attention to detail in all communication with existing or prospective clients.
Such messaging is intended to create haste in your mind, reducing your ability to carefully examine the offer and terms. Later on, this can be used against you with dire consequences.
If a lender asks for an upfront fee in the form of processing charges or other administrative work, this is a red flag. Act with caution.
Take a minute to read this article on how personal loans in India work. This should give you an overview.
All authorised lenders have a registration number and a licence obtained from the RBI. This should be verified before proceeding with your application.
The RBI mandates that all loan terms and conditions should be transparently shared with the customer. All reputed lenders do so. Fake lenders leave it ambiguous on purpose so that they can extort higher amounts later on.
Genuine lenders will never ask for money before processing your loan application. Then, too, most of the charges are adjusted in the loan amount.
Reputed companies have a proper website, a physical address, and a customer care centre. Fake lenders don’t. If you receive a telephonic loan offer, reach out to the company’s support team to verify its authenticity.
All financial companies in India have a secure website, the address of which starts with ‘HTTPS’ and has a lock symbol on the address bar. This is the norm to ensure the security of personal data being provided on the site. If the lock sign or the ‘s’ in HTTP are missing, this tells you that this is likely a fake link.
Buyer beware is an old adage, but quite relevant even today. While the Government has initiated stern action against personal loan scammers, they’re a hard problem to solve. The onus also lies on you to be financially responsible, check for the warning signals, and follow the tricks provided here to prevent getting defrauded by these scammers. On Fi Money, personal loans are disbursed by our RBI licensed bank Federal Bank. The process is paperless and takes minutes.
There are many legitimate lenders out there too. Check this Guide to Applying Online for personal loans.
There are many lending applications and firms in India that are neither authorised nor regulated by the RBI to offer their services. They take advantage of people’s need for cash by offering them instant loans with no formal paperwork or background checks. In their haste and finding the offer seemingly lucrative, people agree to the terms without verifying the lender’s credentials.
Consequently, these fraud lenders can cause mental and physical harassment in the guise of recovery of the loan. They are also known to misuse the personal and financial information you have shared with them, and cheat of your hard-earned savings.
Borrowing money is a serious financial obligation and also a binding contract. It is expected that the loan will be repaid in full, with interest, within the agreed-upon tenor. The failure to do so results in the lender issuing email, snail-mail, and/or telephonic alerts and reminders, as the first step. If there is still no response from you, then the lender can issue a formal loan default notice. This gives you the window of opportunity to discuss with the lender your reasons for being unable to repay the amount. It is at the discretion of the lender whether they are open to some form of settlement or insists on full repayment.
In the worst-case scenario, the lender can opt for legal recourse and if there was any collateral put up by you, it can be sold for the recovery of the amount.
Under no circumstances, however, can the lender coerce, intimidate, or harass you for the recovery of the amount. On the other hand, this is exactly how fake lenders and personal loan fraudsters operate since they are unregulated by the RBI.