The market is experiencing an increase in demand, which drives up supply. In this case, the financial sector is no exception. The industry is expanding with an influx of players, but corollary issues have been cropping up with increasing frequency.
Loan scams are an alarming trend in which people are defrauded by deceitful entities posing as legitimate financial companies. This is true when you observe it happening in a country like India, where increasing reports surrounding loan scams are showing people losing money, property, and sometimes even their lives due to the aftermath of loan scams.
Even though such incidents are extremely common, they are still preventable with the right amount of scrutiny & awareness.
Let’s understand what a loan scam entails and how you can avoid falling into such unscrupulous practices.
Kinds of loan scams you must be aware of:
1. Phishing of the Data
With the growth of the internet and electronic devices in India, you may also see a number of scams and other fraudulent activities taking place. Such frauds only target vulnerable people who are elderly and lack financial literacy, but none of us are aware of the destructive impact.
Data phishing is carried out by people impersonating financial service providers, from well-known banks to lending companies that provide attractive offers.
Under phishing, the most common signs are false representations in loan scams. They pose like they are your bank or financial service provider representative who can fetch the data like your card number, PIN, or OTP. If you end up indulging into this, it will grant and hack all of your accounts, and they will dupe you by taking of your money.
2. Illegal loan apps
With the advent of digital lending in India, people are taking out loans with just one click.
As per the Reserve Bank of India report, there has been 12% growth in digital lending without any legal formalities done in recent years. This was largely due to the COVID-19 pandemic that hit the shoreline.
Lending apps are on the rise in India due to the fact that many people in the country do not have access to formal sources of financing. Banks do not provide loans in other countries.
As per RBI data, between January and February, more than 1100 digital lending apps were illegal.
People fall prey to duping, scams, and other duplicitous options such as interest rates and tenure, which lead to these alarming figures. The number of harassing or shaming tactics used by lenders or third-party companies is on the rise.
Further, you can understand what you can do to avoid falling into loan scams:
1) Avoid downloading any loan app from the store app which is not authentic or verified.
2) Make sure you check the reviews of the application.
3) Avoid loan apps that don’t have clear terms and conditions and fees listed as per the officials.
4) Don’t opt for such application who does not require any documentation or background checks.
5) Don’t take loans from such apps which are not affiliated with the Reserve Bank of India or other regulated NBFC
6) Before you take a loan from any lender check their website.
7) If the loan application claims to offer 0% interest rates, it is to be considered a scam.
How can you protect yourself from loan scams?
To avoid yourself from falling victim to loan scams, thorough research is important. Before you choose the lender, watch out for obvious red flags that can ensure that you have a smooth and harassment-free loan experience. The more your research and secure your base, the lower your chances of falling into a debt trap.
It’s critical to know your rights as a borrower if you’re taking a loan from any kind of financial institution. For example, if you take a loan, the lender can’t demand immediate repayments. They are required to wait for a period of 60-120 days before classifying them as a defaulter, yet unscrupulous lenders won’t stop demanding repayment.
The following tips will help you avoid loan scams and being exploited by them:
1) Before you take a loan, you should make sure that the regulated body is officially registered with the RBI by following the terms & conditions.
2) Find out the exact interest rate plan that fits your payment method.
3) Look for positive ratings on the internet.
4) Search for a lender who is transparent about their fees, practices, and policies.
5) Make sure before you take up a loan every should be disclosed.
In spite of giving your best efforts, you may still find yourself in a difficult situation if you are a victim of a loan scam, whether it is a loan fraud, phishing, illegal loan app scam, or a fake recovery agent.
What to do if you’re stuck in a loan scam?
If you become a victim of a scam, keep detailed records of every transaction, including your EMI payment history.
You can pursue legal help if the lender turns out to be fraudulent.
File a police complaint immediately. If you are being targeted by a loan scam, this is the most important thing to remember. You also file a cybercrime report.
Monitor your bank account closely. If you find anything inappropriate or unauthorised, contact the bank immediately.
Stop all unauthorised transactions. If a person loses money because of an illegal transaction, it is the bank who will cover the amount, only if the account holder is not at fault.
Whenever you suspect such a transaction, block your account immediately and open a new one. Then transfer your money to your new account.
When you’re borrowing money for a reason, the main thing to keep in mind is when you haunt for a loan or change your mind upon an offer that may seem to be good and true, you can probably stick to it. An offer showing unrealistically low interest rates and no trust from the lender is a red warning sign you should consider before taking out a loan.
Choosing a lender based on accurate research and ensuring they are in compliance with regulatory bodies and practice with full-proof is another way to ensure a smooth and hassle-free loan process.