Borrowing fin ance from banks and Non-Banking Financial Companies (NBFCs) is a great solution to any financial woes. However, there are many aspects to be taken into consideration while borrowing. It is extremely important to beware of scammers in the market. Fraudsters identify those individuals who are in desperate need of finance and then target such individuals. It is, therefore, necessary to be on a lookout for any sort of scam associated with availing of a loan.

Following are four common personal loan scams and how to avoid falling prey to the same.

1. Advanced fee scam

Some financiers may give you a call saying that your loan application has been approved and you may obtain the loan after paying a small charge in cash, called ‘advanced loan fee’. This indicates that something is amiss and therefore you must decline the offer.  Once this fee has been paid, you will never hear from the company again. Remember, no lender asks for an upfront fee to be paid in cash. All the charges are to be repaid along with the loan amount.

2. Phishing scam

It is advisable not to provide your personal details to any lender who promises to provide a loan. Quite often, fraud lenders may ask you to disclose your personal details under the pretext of lending a loan on favorable terms. This sensitive information is then sold to lending companies for a commission. Scammers may also send emails under the guise of well-established companies in order to obtain your personal details. Such a fraudulent method is known as phishing. Such fraudsters may steal your identity and open credit accounts under your name. Therefore, verify the authenticity of the lender before divulging any details.

3. No credit check scam

One of the main eligibility criteria for obtaining approval on a loan is credit score. This score is given by the Credit Information Bureau (India) Limited, based on your financial position and past debt repayments. Lenders approve loan applications after conducting a thorough check on your credit score. Beware of your lender if he assures that you will receive a loan quite easily without a credit score check, Chances are that the lender is a fraud and may dupe you.

4. Unsolicited communication scam

You might have received calls and messages stating that you are eligible for a loan and may apply for one at the earliest. Such messages are sent by fraud lenders, who try to extract your personal details. Generally, such messages and emails are sent to those in urgent need of cash, thus tricking them to believe that they will get a guaranteed loan without any sort of eligibility criteria or credit score check. Do not fall prey to such messages and calls. Instead, check for the lender’s reputation and sign on the dotted line only when you are convinced of the authenticity of the lender.

Genuine lenders aim to offer the best loan terms, so as to live up to their reputation and satisfy borrowers at the same time. To be on the safer side, you may opt for a personal loan from your past lender, who may offer you favorable terms as you are a loyal customer. In case you are a first-time borrower, conduct extensive research on different lenders before you select a particular lender to apply for a personal loan