5 common personal loan scams every borrower should watch out for

As the Indian economy continues to evolve due to the advent of technology and artificial intelligence, so do the tactics used by scammers to defraud innocent people and carry out sophisticated personal loan scams.

That is why, before applying for any new personal loans, it becomes essential to recognise and avoid these fraudulent schemes to protect and safeguard your personal information and to ensure long-term financial prosperity.

Personal loan scams

1. Fake loan apps: Fraudsters launch counterfeit applications that appear genuine, collect your personal details, and vanish without disbursing any loan, putting you at risk of identity theft. The data submitted by you is then used to carry out unauthorised transactions or to obtain new credit cards in your name to cause decisive financial damage.
2. Upfront fee scams: In these scams, scammers put pressure on aspiring borrowers and demand processing fees or insurance fees before approving their personal loan. These charges are primarily illegitimate, and such lenders generally disappear after receiving payments. That is why you should always borrow from legitimate lenders only and never fall for any pressure tactics.
3. Phishing calls and emails: In phishing scams, criminals copy and impersonate legitimate lending institutions. Similarly, they send fake SMS, emails, or calls to borrowers in need and obtain sensitive data, such as Aadhaar details, PAN details, bank account details, and OTPs. The sharing of such critical data results in financial fraud and loss of funds.
4. Fake documentation requests: Fraudulent agents or websites ask for original images of documents under the guise of personal loan verification, later using them for illegal activities or to open new personal loans or credit cards in your name.
5. Loan guarantee fraud: Certain illegitimate financial institutions promise guaranteed personal loan or home loan approval regardless of your credit history, but insist on upfront payments. Now, in all such cases, it is crucial to keep in mind that authentic lenders never make such unconditional assurances.

Borrower rights, duties, and complaint redressal mechanisms

If a borrower falls victim to a personal loan scam, complaints can be lodged with the following authorities and platforms:

• RBI Consumer Education and Protection Department: Individuals facing difficulties can reach out to the RBI's official website and register their complaint. For complete details on the same, you should visit: https://www.rbi.org.in/Scripts/Complaints.aspx
• Banking Ombudsman Scheme: If you face issues with banks, NBFCs, or regulated lenders, file a complaint under the RBI Integrated Ombudsman Scheme athttps://cms.rbi.org.in.
• Ministry of Consumer Affairs, Government of India: This is yet another important portal for registering your grievances, tracking them, and uploading vital documents to support your case. It provides consumers with a platform to achieve a speedy resolution to their consumer disputes. It can be accessed through the link: https://consumerhelpline.gov.in

Borrowers have the right to timely information, fair treatment, and confidentiality of their data under RBI regulations. It is not only essential for them to dodge common personal loan scams but also to report any such happenings promptly. Taking proper steps in the same direction not only helps restore the financial rights of victims but also prevents scamsters from continuing their illegal agendas.

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