Fraud loan ads are a growing problem in the financial space. These ads often target people who are struggling financially and promise quick and easy loans with no paperwork or credit checks. However, these loans often come with high interest rates and hidden fees, and borrowers can end up owing more money than they borrowed. It is crucial for the loan-seekers to sense some of the red flags to look out for in fraud loan ads.
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According to a RBI booklet on modus operandi of financial fraudsters in the NBFC space, scammers issue fake advertisements offering personal loans at very attractive and low rates of interest or easy repayment options or without any requirement of collateral/ security, etc..
Modus operandi according to the booklet
- Fraudsters send emails with such offers and ask the borrowers to contact them.
- To gain credibility with the gullible borrowers and to induce confidence, these email-ids are made to look-like the email IDs of senior officials of well-known / genuine NonBanking Financial Companies (NBFCs).
- When borrowers approach the fraudsters for loans, the fraudsters take money from the borrowers in the name of various upfront charges like processing fees, Goods and Services Tax (GST), intercity charge, advance Equated Monthly Instalment (EMI), etc., and abscond without disbursing the loans.
- Fraudsters also create fake website links to show up on search engines, when people search for information on loans.
RBI booklet also underlined the following precautions;
- Loan processing fee charged by NBFCs / banks is deducted from the sanctioned loan amount and not demanded upfront in cash from the borrower.
- Never pay any processing fee in advance as NBFCs / banks will never ask for an advance fee before the processing of loan application.
- Do not make payments or enter secure credentials against online offer of loans at low interest rates, etc., without checking / verifying the particulars through genuine sources.
Here are some tips to help you avoid fraud loan ads:
- Do your research before you apply for a loan, know about the lender. Check their website and read reviews from other borrowers.
- Be wary of ads that appear on social media or in unsolicited emails, these ads are more likely to be scams.
- Don’t give out your personal information as legitimate lenders won’t ask for your personal information before you’ve applied for a loan.
If you encounter fraudulent loan ads, report them to the appropriate authorities. You can lodge a complaint with the Cyber Crime Cell of your local police station or report it to the RBI’s Sachet portal (https://sachet.rbi.org.in). Provide as much information as possible, including the ad’s content, website, or any communication you received.
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