Top 5 Loan Scams to Watch Out for in India

Loan scams are increasing in India, tricking people with fake offers. Fraudsters ask for upfront fees or steal personal details. Stay alert – always verify lenders and avoid suspicious links or apps.

Here are the top 5 loan scams to watch out for in India:

1. Fake Loan Apps & Websites

Fake loan apps and websites are scams that trick people into giving money or personal details. They often promise quick loans with low interest, but are not real lenders. These apps may ask for upfront fees or access to your contacts and photos. Once they have your information, they can misuse it or demand more money. 

Always check if the app is registered with the Reserve Bank of India (RBI) and read reviews before using it. Avoid apps that ask for too many permissions or have unclear loan terms. Use trusted sources like the Google Play or Apple App Store to download apps. If something feels wrong, it is better to stay away.

Example: Bhanu's Experience with a Fake Loan App

2. Upfront Fee Scams

In India, many loan scams involve upfront fees. Scammers promise quick loans but ask for money first. Once paid, they disappear. Always be cautious if someone asks for money before giving you a loan.

Example: Aditya's Story

Aditya needed ₹50,000 for his education. He found a loan offer online. The lender said he must pay ₹5,000 upfront as a "processing fee". Aditya paid the fee, but he did not receive the loan amount. The lender stopped answering his calls. Aditya lost his money and did not get the loan.

Aditya's Loan Scam

Key Takeaway: Never pay money up front for a loan. Legitimate lenders do not ask for fees before giving a loan. Be careful and protect your money.

3. Phishing & Impersonation Scams

Scammers often pretend to be from banks or loan companies. They call or message people, offering easy loans. They ask for personal details like Aadhaar number, PAN, or OTP. Once they get this information, they misuse it to steal money or take loans in the victim’s name.

Example: Priyansh, a 20-year-old student, received a message from someone claiming to be from a bank. The message said he was eligible for a loan of ₹1,00,000 at a low interest rate. He was asked to pay a processing fee of ₹5,000. Believing it was genuine, Priyansh transferred the money. Afterwards, the person stopped responding, and Priyansh realised he had been scammed.

Priyansh's Loan Scam

4. Loan Restructuring & KYC Update Scams

In India, loan restructuring and KYC update scams have become prevalent, targeting individuals seeking financial assistance. Fraudsters often impersonate bank officials, claiming that loan restructuring or KYC updates are necessary to avoid account suspension. 

They may send fake links or APK files, urging victims to provide personal information or make payments. Once the victim complies, their bank details are compromised, leading to unauthorised transactions. 

It is crucial to verify any such requests directly with your bank through official channels. Avoid downloading unknown files or clicking on suspicious links. Always be cautious and report any fraudulent activity promptly.

Example: Aayush's Experience

Aayush's experience highlights the importance of vigilance. Always verify such requests with your bank and refrain from downloading unknown files.

5. No Credit Check Offers

In India, scams offering loans without credit checks are increasing. Scammers promise easy loans to people with low credit scores. They ask for advance fees, like processing charges or insurance, before giving the loan. After receiving the money, they disappear, and the loan is never given. 

These fake lenders often use names similar to real banks or financial companies. They may contact victims through calls, emails, or social media. Always be careful. Real lenders do not ask for money before giving a loan. Never share personal or bank details with unknown people. If something feels wrong, report it to the police or cybercrime cell. Stay alert to protect your money.

Example: Manakaran's Experience

Manakaran's story shows the importance of verifying loan offers and being cautious with personal information.

Conclusion

Always be careful with loan offers. Real lenders do not ask for money up front or personal details. Check if the lender is RBI-approved. Avoid unknown apps or links. If something seems too good to be true, it is likely a scam. Stay safe!

FAQs

1. Can I trust loan apps that ask for upfront fees?

No, genuine lenders never ask for money before approving a loan.

2. What should I do if a lender promises a loan without a credit check?

Avoid it – real banks and lenders always check credit history.

3. How can I verify if a loan offer is real?

Check if the lender is registered with the RBI and read reviews before applying.

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About the Author

LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?