Don't want to fall into a loan trap? Here’s how to verify lender before borrowing

In recent months, there has been a rise in the number of scams and fraudulent operations targeting loan seekers in India. From young borrowers to elderly, especially those who are financially uneducated, become more vulnerable to such scams. Due to a lack of financial readiness which makes borrowers more susceptible to such frauds, lenders take advantage of their vulnerable position by offering fraudulent loans under the guise of quick and easy funding. The loan frauds have gone up with the emergence of digital lending platforms.

If you are also planning to take a loan and don't want to get stuck in a loan fraud, take a look at how you can verify lenders before taking a loan. 

How to verify lenders?

Check lender's details: Before applying for a loan, one must carry out a safety check by verifying their details, including the registration number. Notably, any genuine lender in India must be regulated by the Reserve Bank of India (RBI). Any lender without authorisation from the RBI can’t offer loans in India. It’s always safe to seek loans from banks and reputed NBFCs.

Check lender websites: Borrowers should also check the websites of the lender that contains all the necessary information including the company identification number (CIN), certificate of registration (CoR), key management personnel, and other important information. Usually, illegal lenders don't have any such information or a genuine website. 

Check loan approval process: Unauthorised lenders or lending institutions often skip the crucial steps of loan approval. Thus, borrowers must remain aware of such lenders. A non-transparent loan approval process could be a red flag for fraud. 

Check reviews: One of the easiest and quickest ways to check the authenticity of the lender is by checking their reviews and ratings as provided by existing customers on the internet. One can also check the Google Play Store or App Store to check reviews on the apps. 

Credit history: Genuine lenders usually check the borrowers' track records or credit history before lending money. However, fraudulent landers work in a different way. They are not really interested in knowing about an applicant’s credit history. Instead, they often look for desperate borrowers who may not likely examine any details and thus quickly fall into a trap. 

Hidden fees: Before taking a loan from a lender, borrowers must check that they know all details about the loan application including the appraisal and credit report. Any sort of inappropriate fee can indicate fraud.