How to avoid loan scams this year?

Do you keep getting messages related to loan schemes on your phone daily? Most of them would look like:

“Pre-approved loan of Rs. 5,00,000. Apply now!”
“Rs. 2,00,000 transferred to your bank account as PL. Get money now.”
“Instant loan approval of Rs.. 4,00,000 and money transfer into account in 2 minutes. Click here.”

90% of the time such messages have no triggers from your end. You might not have checked your credit score, might not even be in need of a personal loan but still you are being targeted as one of the prospective customers. Few questions that would come to your mind instantly after seeing such messages are – “How do they know I am applicable when I have not given them any of my documents?”, “Do they know my credit score without me even submitting my details?”, and the primary question that arises is “IS THIS A SCAM?”. The third question is the most genuine doubt one can have and let’s be honest, yes there is a high chance that such a message is a part of a bank fraud.

So, be a smart consumer and take a look at what kind of fishy messages to avoid during 2020. Get your loan ethics right and stay away from these loan scams and bank frauds in 2020:

1. Pre-approved loan with no information whatsoever


What are the odds that a party is willing to give you a loan without knowing what all constitutes your financial history? You could be a fraud or you could be bankrupt, still you get a  message of pre-approved loan amount anyway. This means that someone is trying to lure you into a money fraud. A person who has none of your details, even your name can’t be willing to give you 5 lakhs in no time. This one screams bank FRAUD like nothing else!

2. The personal document loop


A natural part of the loan process is to take your aadhar card and KYC details for identity verification. Let’s say you get a loan offer of Rs 5,00,000 and decide to go ahead with the process of approval. They ask for your personal documents and you share it all with them very willingly because you are in desperate need of money. Once, you submit the documents you don’t really know what the lending party is doing with your docs. They could make a hard pull to get your credit score instead of a soft one and that could result in a drop in your credit score. In case this particular lender rejects your loan request, you suffer on two fronts. Firstly, the hard pull results in a drop in your credit score and secondly, your chances of loan approval in future by another lender also get tainted. 

3. Reducing or flat?


As a smart customer, you need to ensure that no banks/NBFCs can fool you! A very common mistake that the majority of us make while getting a loan is not checking what kind of interest rate (ROI) is being offered. The two kinds of interest rates that banks/NBFCs offer are reducing or flat. Reducing ROI means that the current interest rate is on a decline and will be calculated monthly on the remaining loan amount, EMI after EMI. If a bank or NBFC offers you a reducing interest rate of say 21% even after having a good track record, then it’s not a good idea to take loan from the particular bank/NBFC. A reducing rate of 12-13% is still acceptable as it will result in approx. 6-7% flat ROI which is economic enough in comparison.

Check with your lender about this beforehand, and try to get a reducing ROI. Banks play smart here and don’t tell the consumer about the proper details for getting away with higher interest rates. Try to avoid this situation by being aware of your options and choices as a consumer.  Apply for a personal loan at Sqrrl to get attractive interest rates.

4. Advance money for more money!


The loan schemes that ask you to pay a certain processing fee amount in advance before you get the main loan amount in your bank and a big scam. The usual way banks/NBFCs go about the processing fee collection is that they cut the processing fee amount directly from your principal amount and give you the rest. Don’t ever pay thousands of rupees in advance in the hopes of getting a loan as the chances are that you will end up losing even the amount you paid to begin with. Stay away from this very common financial/bank fraud. 

5. Debt management schemes can be fishy


It does not really help if you end up losing more than you gain. Steer clear of any offers that promise to help you in repaying debt sooner than later. If any agency/NBFC/Bank proposes to you that you take so and so financial measures, say for example – pay off an already existing loan by taking another bigger loan at a higher interest rate, say NO to this offer without thinking for a second. This is what will push you into a debt cycle, wherein you are always under some kind of financial obligation. This is a very recent scam trend that has emerged and now that you know about this potential bank fraud, you can avoid it!

Stay safe and be on the lookout for all such financial frauds and scams. Any deal that sounds too good to be true is probably NOT, so be careful 🙂


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