Loan Frauds: The recent pandemic has seen an increase in various financial frauds. Loan fraud is one of the most common types of fraud that emerged during that time, when people needed instant funds to take care of their medical or other needs. Digital and technological advances have been a boon to the financial services industry, but they also present precarious challenges that can become almost difficult for a layman to identify, let alone stay safe against such dangers. Misusing the beneficial use of digital technology, fraudsters can hide their real identities behind the anonymity of the world wide web to impersonate legitimate companies and hack into people’s accounts to carry out financial fraud. The unprecedented COVID-19 pandemic, which took everyone by surprise, acted as a further catalyst. Many people became more vulnerable due to their lack of financial preparation to face the adverse situation. Fraudsters took advantage of this helpless situation to offer fraudulent loans disguised as easy and instant funds without any documentation.
Potential borrowers need to be aware of loan scams and learn how to identify them to save themselves from financial loss and mental health problems. Fakhari Sarjan, Chief Risk Officer of Bajaj Finance Limited, shares his knowledge to raise awareness and suggests 6 ways to identify loan fraud:-
Ways to Spot Loan Scams
1. Looking for refundable money advance – “The prominent red flag of loan fraud: If any lender offers you easy loans for an up-front fee in the name of refundable processing fee, GST charges, insurance fee, up front, just stay away! No legitimate or authorized financial institution will ask you for money in advance before disbursing a loan. If there is a processing fee involved, it will be adjusted in the loan amount before it is credited to your account,” according to Fakhari Sarjan.
2. Create a sense of urgency- “A loan on a clock with pressure from the lender to act urgently is another indicator of personal loan fraud in India. Real lenders and genuine companies do not make an offer for a limited period and give enough time for the person to decide,” Sajan suggested.
3. Unknown company name – “It is imperative that people verify the identity of the company that offers loans through their official websites or by visiting their branches to ensure that they do not fall into fraud traps. Always do a thorough research on the company’s credentials before sharing your sensitive personal and financial data in an ad related to a loan offer that you might see on their Facebook page, YouTube page, or even ads on their website. your local newspaper,” he added.
4. Unsolicited communication- “Fraudsters also send SMS, emails, WhatsApp messages and make calls to people offering instant cash availability through zero percent loans. Such emails and messages may lead you to believe that you will get a secured loan without meeting any criteria. The scammer works with the motive to extract your personal and financial information to siphon off your money. They can even disguise themselves as representatives of renowned financial institutions to catch you in their vicious schemes. But it is always best to remember that no authorized entity will call or send you unsolicited communications to collect your sensitive financial and personal data under the guise of loan offers,” he added.
5. Secured Loan Approval- “You should stay away from any loan advertisement that says ‘guaranteed loan approval.’ There is no such thing as a secured loan. Loan approval depends on several factors, including your credit history and verification of your information,” he advised.
“Furthermore, one should always be informed about the various measures to take, if they fall victim to such rampant loan scams:
1. Never panic or ignore such fraudulent scenarios
2. Keep your communication documented, in order to serve as supporting evidence when filing a complaint.
3. Customers should never leave their mobile phone numbers/proof of ID/proof of address on social media platforms or websites as they can be misused.
4. Report the matter to the bank or financial institution
5. File a complaint on the Cyber Crimes website at https://cybercrime.gov.in/ or call their 24×7 helpline 1930, formerly 155260
6. You should even visit the nearest police station to file an FIR,” he suggested.
“Always stay vigilant and aware of changing fraud trends and share your experiences and learnings with your friends, family and society to help others too, stay vigilant while applying for loans. In case of any financial transaction, always deal only with reputable and legitimate financial institutions,” he concluded.
(Disclaimer: The opinions/suggestions/tips expressed here in this article are solely those of the expert.)