How to recognize and stay safe from loan scams
How to recognize and stay safe from loan scams
The concept of taking credit — allowing you to borrow money to meet your immediate needs and repay it later is a boon for many people, especially those who have lost a job or had a medical emergency. Fraudsters extort money from innocent people in bad situations by offering them a greedy lure to give them loans in loan scams.
What is a loan scam?
In a loan scam, fraudsters make people believe that they can get a loan easily and quickly. A fraudster devises a fraudulent scheme based on the victim’s needs.
For example, if a person does not have a good credit score to get a loan from a good bank or needs a large amount of loan in a very short period of time, the fraudster will trick the victim into convincing them that it will be a matter of minutes for them to help them get the loan they need. .
There are two main consequences of falling for a loan scam — either the fraudsters demand a certain amount as security which is never repaid, or charge a hefty amount in the name of processing fee, late fee, interest, etc. — ultimately resulting in a huge loss to the victim.
How does a loan scam happen?
Loan fraudsters prey on vulnerable borrowers by taking advantage of the unmet need for credit and offering credit without any conditions. They contact you via SMS, email or phone and often ask you to download the app and fill in your details for instant loan approval.
After downloading the app, they’ll demand access to everything on your phone — your entire contact list, photos, videos. As soon as you fill in the basic details like your Aadhaar, PAN, address and the amount you want, you will see the money credited to your account.
These loans are given under complex terms and conditions which are not mentioned at the initial stage. They trick victims with the promise of low interest rates and later claim that the low interest rates were only for a limited period,
Then the rate of interest is increased to a very high rate — about which they do not mention at the time of disbursement of the loan. Along with high interest rates, fraudulent instant loan companies charge heavy penalties on a daily basis for non-payment of loans. This includes higher processing fees and other penalties.
While some fraudsters ask for certain documents like — 3 months bank statement, Aadhaar card and PAN, others do not ask for any such document. In both these cases, however, the loan amount is disbursed within minutes.
These apps gain access to all the information from the victim’s phone on the pretext of advancing the loan, which the fraudster uses to defraud the person of more money or commit other financial crimes.
Victims who fall into such loan scams and accept the money offered are harassed by recovery agencies to repay the loan amount. The person and the persons in his contact list are sent obscene messages, indecent photos and offensive texts.
Red Flags to Avoid Loan Scams
Here are some things that will tell you right away that you have been contacted by a loan fraudster:
Lender’s organization is not registered with Reserve Bank of India and not affiliated with any recognized bank or NBFC
Loan apps on the App Store are not verified, disclose loan terms and conditions, or check your credit report before approving a loan.
A lender is not registered, has no physical office of its own
Or not having a legitimate website
Loan fee is demanded before disbursement of loan
No credit verification and the loan is stated to be credit free
The lender may offer a very low rate of interest and it is for a limited period
How to avoid loan scams:
Do not share your card details with anyone via phone, email or any other means.
Always evaluate a lender’s physical office and website to verify their credibility.
Do not share OTP or other personal information with anyone.
Be aware of loan offers as scams always offer somewhat dubious benefits.
Important Reminder — PhonePe never asks for confidential or personal information. Ignore all emails claiming to be from PhonePe if they do not have the phonepe.com domain. If you suspect fraud, please contact us at support.phonepe.com or file a police complaint at https://cybercrime.gov.in/