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22-03-2023

How to Spot and Prevent Personal Loan Scams in India: A Guide to Protecting Your Finances

Personal loans have become increasingly popular in recent years, making them a common type of credit in India. However, there is always a risk of falling victim to fraud or scams when dealing with any type of financial product. In this article, we will discuss how to spot personal loan scams in India and take precautions against them.

Indicators of Loan Scams in India

Unwanted Calls and Texts: Loans with minimal paperwork or waiting periods are a common bait used by fraudsters. If something seems too good to be true, it probably is.

No Credit Checks Required: Every reputable financial institution will verify your credit history before approving you for a personal loan. You should be wary of any lender that either doesn’t check your credit or demands money before doing so.

Upfront Payments: It’s a red flag if the lender you’re considering requires you to pay money upfront before they’ll even start working on your loan application. A processing fee will typically be deducted from the total loan amount, rather than paid upfront by a reputable lender.

Website Security: To avoid any issues, make sure the website you are applying on has a valid SSL certificate and is encrypted. Look for the “https” prefix or lock symbol in the address bar.

Rushed Decisions: Scammers will try to rush you into accepting a loan from them without giving you time to do your homework or think things over. Don’t make a decision on the spur of the moment. Be sure to shop around and compare rates.

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Preventing Loan Scams in India

Research the Lender: When applying for a loan, it’s important to do your homework and learn as much as possible about the lender. Verify their authenticity and reputation online. Check out what others have said about their products.

Shop Around: Before committing to a lender, it’s a good idea to shop around and compare interest rates and fees offered by different institutions. By doing so, you can avoid paying exorbitant interest rates and other hidden fees.

Check RBI Registration: All Indian lenders must be licensed by the Reserve Bank of India (RBI). It’s wise to confirm their registration and qualifications with the RBI before applying for a loan.

Read the Loan Agreement Carefully: Never sign a loan agreement without thoroughly reading it and understanding its terms and conditions. Don’t sign anything you don’t fully comprehend. If you have any doubts or questions, ask the lender for clarification.

Report Fraud: If you believe you are the victim of loan fraud, notify the police and the RBI promptly. This can help prevent others from falling for the same scam.

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Conclusion

Taking precautions and doing your research can help you avoid falling victim to personal loan scams in India. Before signing a loan agreement, do your homework, check the lender’s licensing, and read the fine print. Remember, the old saying “if it sounds too good to be true, it probably is” applies here.

Disclaimer: This article is for reference only. The author’s opinions expressed in this article are their own and not necessarily those of any bank or its employees. Neither the bank nor the author can be held liable for any direct or indirect damages or liability suffered by the reader or anyone else using the information in this article to make financial decisions. Before making any major purchases or investments, consult with a financial expert.

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CIBIL Score is a three-digit numeric summary of your credit history. The score is derived using the credit history found in the CIBIL Report (also known as CIR i.e Credit Information Report).
A CIR is an individual’s credit payment history across loan types and credit institutions over a period of time

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