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Taking a personal loan is very common in India and you might also need to one in the future when a situation demands emergency funds. Lenders usually hire marketing companies to source personal loan customers. This deed is seen by fraudsters as an opportunity to trick customers into personal loan scams.

As a personal loan customer, it’s your duty to educate yourself and become aware of the malpractices and foul play that goes on in the loan sector. Here are few tips that would help avoid being a victim.

5 Tips On How To Identify and Avoid Personal Loan Scams

Say No to Advance Fee Loans

Under this type of scam, a third party demands money as advance fee from you in lieu of getting your loan sanctioned. No bank or NBFC charges a processing fee unless your loan is approved. This fee is deducted from your loan amount and you don’t have to pay it in cash. Any person asking for a ‘processing fee’ to get your loan sanctioned is a fraudster and someone you should inform the police about.

Say No to Lenders Who Aren’t Interested in Your Credit Background

Genuine lenders never give you money without thorough investigation of your credentials. They do this to check if you’ll be able to pay off the debt. One such credential is your credit score, which guarantees your ability to pay back the loaned amount. This is the reason why a personal loan finance company would approve your loan only if you have a decent credit score. Anyone offering you a loan without a background check is likely to be a fraudster.

Consider the Sales Tactics Used by the Lender

Lenders offer loans in order to make money. They usually charge you an interest rate, send a quote, and follow up if you say that you’re interested in the deal or want to negotiate.

However, if the lender pushes you to take loans—offering low interest rates and maximum returns—which do not follow trends in the market, something is definitely not right. High pressure tactics to complete loan application form or share personal information are sure shot signs of scams.

Make Sure that you Choose a Reputable Lender

Whether you are taking online personal loans or offline loans, make sure that you choose the lender wisely. There are numerous companies and their agents in the market that offer a lot of policies, which is why you should take your time to before taking a decision. Check the background of the lender and ensure that that the bank or NBFC is registered under Reserve Bank of India (RBI).

Check ID Proof

Make sure to check the authenticity of the agent you are communicating with. Lenders usually send their agents from their offices. However, there are some who have tie ups with marketing agencies. When these individuals show up, you must cross check their credentials with the associated bank.

You should also read all clauses, terms, and conditions mentioned in the loan policy before signing the final document. Consulting financial experts is also a great way of finding faults with a policy.