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What is Loan fraud? - Signs, safety & types
Loan fraud is unlike normal fraud whereby a fraudster dupes you of your hard-earned money. It is more of an identity theft where the bank is duped using your name. It involves employing a well-planned tactic where the fraudster uses your name and identity to secure loans from banks and financial institutions. The money is withdrawn entirely by the fraudster. As your identity was used to borrow, you become liable for repayment. Since it is mostly online, you won’t get to know about it immediately. By the time you are aware, your credit score would have taken a hit. Personal loans serve as the primary avenue for perpetrating these frauds.
Types of Personal Loan fraud
Various types of Personal Loan frauds that are prevalent in today’s time are:
- Phishing: It is one of the most common types of loan scams where the fraudsters try to get your personal data by posing as an executive or representative of a reputed institution. One of the most common ways is by reaching out through email. Other methods include advertisements, malicious events etc.
- Data breaches: This happens when a hacker bypasses the security to enter and hack the database of any organisation to extract useful, confidential and personal information. These data can then be used to apply for loans and credit facilities in the names of other people.
- Advance fees: Loan processing entails certain costs in the form of processing fees, administration charges, login fees etc. Scammers approach you with a fake loan offer and promise approval after you pay them certain processing or other fees. Once you pay, they vanish.
- Document misuse: If your documents are stolen or your ID proofs are compromised, scammers can use them to execute identity theft. They will use it to get loans in your name, withdraw all the money and vanish.
- Fake loan agents:Many scammers pose as fake loan agents and target specific people like those with low credit scores. They promise them loans against certain payments. Once the payment is received, they disappear with the money.
Tips to safeguard yourself from fraud in lending
Having understood what a loan fraud is and how it happens, it is important to know how you can dodge them. If you want to avoid falling prey to fraud in lending, here are certain precautionary measures you should take:
- Approach authentic lenders: If you need a loan, you should approach a reputed financial institution to avoid any chances of loan fraud.
- Save data wisely: You should store your identity and confidential data securely.
- Don’t share personal information: You should avoid sharing personal information in public spaces like social media etc.
- Regularly check credit reports: You should regularly check your credit reports to check the credit facilities running in your name. It is recommended to check your credit report every 6 to 12 months.
- Monitor your bank accounts: You should regularly monitor your bank accounts to check for any inappropriate deductions or facilities, if any, sanctioned in your name.
- Educate yourself: You should stay updated and educated on the latest tactics that scammers use to dupe people of their hard-earned money.
Signs to understand Personal Loan scams
The signs that will help you know whether you are being targeted for a Personal Loan scam or not are:
1. Application scam
If the suspected agent or lender allows you to get the loan without any application, verification or document, then it is highly likely that it is a fraudulent loan offer.
2. Demanding up-front cash
If the suspected lender asks you to pay up-front fees or charges even before the application processing has begun or the loan is approved, then it is likely that he is scamming you. Most lenders require you to pay only at the time of sanction or disbursement or reduce it from your sanctioned amount.
3. No disclosure of charges and costs
If the suspected lender is unwilling to disclose the associated charges and costs of the loan, then it is possible that the lender is scamming you.
4. Guaranteed loan application
If the suspected lender provides you the guarantee that the loan will be sanctioned without even checking your eligibility and documents, it is very likely that it is a fraudulent loan offer.
5. Spontaneous communication
Reputed lenders usually advertise their loan offerings in the public domain and not recline to coming to your house. If a lender comes knocking on your doorstep wanting to know if you require a Personal Loan be suspicious. If this happens, it is likely that you might be getting scammed.
6. The lender doesn’t have a physical address
If the lender is operating entirely virtual or does not have a physical presence anywhere, it is possible that they are scamsters and planning to carry out a fraudulent transaction. All reputed lenders will have a correct physical address and other important communication details which is open to the public.
7. The lender is not licensed in your state
If the proposed lender is not licensed to operate in your state or is banned there, then you should steer clear of such suspected parties as this is very evident of a lender scam.
8. Time-bound offers or limited period schemes
If the lender creates a sense of urgency by stating that they are offering you a limited-time offer or an attractive scheme, then it is possible that they are scamming you. Do not respond at any cost.
9. It appears to be unreal
If the offer is too good to be true or appears unreal, then you should stay away from such offers. These offers are designed by fraudulent lenders to lure more and more people, especially those in urgent need of money.
Also Read: How can you get a Personal Loan online with 6 easy steps?
In a nutshell
Loan frauds are getting common and therefore, it is important that you stay vigilant and updated with the latest tactics. Often, these lender frauds happen in the case of Personal Loans as they don’t require any security/collateral and have a simple process. Selecting the right lender is crucial to not only stay safe from such frauds in lending but also get the best offer. Axis Bank is a pioneering financial institution that has been the borrower’s choice for all their lending needs. With the highest level of safety standards, attractive terms and affordable rates, you can get Personal Loans without any hassle. Visit the Axis Bank Personal Loan page for more information.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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