Digital and technological advancements have been a boon to the financial services sector. However, it has also given rise a to new wave of cybercrimes and online frauds.
The recent pandemic witnessed a surge in various financial frauds. In fact, nearly 550 of the digital lending apps available during February 2021 were illegal. The immediate need for funds can make availing a loan through the regulated system difficult. Many fraudsters exploit this “urgent need” and dupe people out of their hard-earned money. In many cases, these lenders harass their borrowers for loan recovery, sometimes even leading to death.
However, once you are aware of the signs of such scams, it is unlikely that you will fall for them. Here are a few ways in which illegitimate loan providers lay out their traps:
Clickbait language: The most popular loan scams advertise attractive offers like “Guaranteed loan approval” or “No credit check required”. A legit financial institution will look at several factors such as your creditworthiness, income sources, existing loan commitments and verify your repayment ability before approving a loan.
Creating a sense of urgency: Be wary of mails or ads that promise you offers for limited period of time. Such tactics are used to create a sense of urgency and trick you. Genuine lenders do not make such limited period offers and give sufficient time for customers to make their choice.
Demanding up-front payment: Regulated financial institutions charge a processing fee before granting the loan but the amount is deducted from the loan advanced to you. However, in a typical scam, they demand money or a fee beforehand for “insurance” or “processing”.
So, what must you do to avoid such traps?
- Check the identity of the lender through their official websites or visiting their branches
- Always double check the web address. For example, if the lender’s website has only “http” instead of “https”, immediately stop surfing as it allows the scamster to obtain personal information.
- Ensure that the lender is registered with a regulatory body such as the RBI or works with RBI-approved institutions. Such lenders are usually transparent about their fees, practices, and policies.
- Check if the lender has positive or negative reviews on the internet.
- Find out the exact interest rate cap for the category of loan and lender, and make sure what you are being charged is within the limit.
- Obtain details about repayment schedule as well as prepayment penalties. Make sure the lender offers a degree of protection and flexibility in terms of repayment and default.
- Ensure that the lender has a public available grievance redressal system or a working customer helpline in place.
In case you do fall prey to such scams, keep your commination documented and file a complaint on the Cyber-crime website at https://cybercrime.gov.in/ or call up their 24×7 Helpline 1930.
Research is key
Always do a thorough investigation about the company’s credentials before sharing confidential financial and person details over a loan offer. Selecting a lender after doing your research and making sure that they abide by regulatory mandates is a fool-proof way to a hassle-free and transparent loan journey.