Customer awareness: 6 ways to identify loan frauds - Expert's suggestions

Loan Frauds: The recent pandemic witnessed a surge in various financial frauds. Loan fraud is one of the most common types of fraud that has emerged during that time, when people needed instant funds to cater to their medical or other needs. Digital and technological advancements have been a boon to the financial services sector, but they also present precarious challenges which may become nearly difficult for a layman to identify, let alone stay safe against such hazards. Misusing the beneficial usage of digital technology, fraudsters can hide their real identities behind the anonymity of the world wide web to impersonate legitimate companies and hack into the accounts of people to carry out financial frauds. The unprecedented COVID-19 pandemic, which caught everyone off guard, acted as a further catalyst. Many people became more vulnerable because of their lack of financial preparedness to deal with the adverse situation. Fraudsters took advantage of this helpless situation to offer scam loans in the garb of easy and instant funds without any documentation. 

Potential borrowers must become aware of loan scams and learn how to identify them to save themselves against any financial losses and mental hassles. Fakhari Sarjan, Chief Risk Officer, Bajaj Finance Limited, shares his knowledge to raise awareness and suggests 6 ways to identify loan frauds:-

Ways to Spot Loan Scams

1. Seeking advance refundable money – “The prominent red flag of a loan fraud - if any entity offers you easy loans in exchange of an advance fee in the name of Refundable processing fee, GST charges, Insurance fee, beforehand, just stay away! No legitimate or authorized financial institution will ever ask you for any advance money before disbursing a loan. If there is a processing fee involved, it will be adjusted in the loan amount before getting credited to your account,” as per Fakhari Sarjan.

2. Creating a sense of urgency- “A loan on a ticking clock with pressure from the lender to act urgently is yet another indicator of personal loan fraud in India. Actual lenders and genuine companies do not make a limited period offer and they give enough time for the individual to decide,” Sarjan suggested.

3. Unfamiliar company name - “It is imperative for people to check the identity of the company offering loans through their official websites or visiting their branches to ensure they don’t land up in fraud traps. Always, do a thorough   research about the company’s credentials before sharing your confidential financial and personal details over a loan offer related advertisement that you may see on your Facebook page, YouTube page or even in your local newspaper ads,” he added.

4. Unsolicited communication- “Fraudsters also send SMS, Emails, WhatsApp messages and make calls to people offering instant availability of cash through zero percent loans. Such emails and messages can make you believe that you will get a guaranteed loan without fulfilling any criteria. The fraudster works on the motive of extracting your personal and financial information to siphon off your money. They may even disguise themselves as representatives of reputed financial institutions to entrap you into their vicious schemes. But it’s always best to remember, that no authorized entity will call you up or send you unsolicited communication to gather your confidential financial and personal details on the pretext of loan offers,” he further said.

5. Guaranteed Loan Approval- “You will want to stay away from any loan ad that says, ‘loan approval guaranteed’. There’s no such thing as a guaranteed loan. Loan approval depends upon several factors, including your credit history and verification of your information,” he advised.

“Also, one must always be informed about the various measures to take, if they fall prey to such rampant loan scams -
1. Never panic nor ignore such fraudulent scenarios
2. Keep your communication documented, in order to furnish as supporting proof at the time of filing a complaint  
3. Customers should never leave their mobile numbers/ ID proofs/ address proofs on social media platforms or websites as they can be misused
4. Report the matter to bank or financial institution
5. File a complaint on the Cyber Crime website at https://cybercrime.gov.in/ or call up their 24x7 Helpline 1930, which was earlier 155260
6. You should even visit your nearest police station to file an FIR,” he suggested.

“Always, stay alert and aware of the evolving trends of frauds and share your experiences and learnings with your friends, family and society to help others too, stay on their guard while applying for loans. In case of any financial transaction, always deal with reputed and legitimate financial institutions only,” he concluded.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by the expert.)