With the rapid rise of digital lending across the nation, thousands of aspirational borrowers are turning towards personal loan applications for instant access to funds. This is done primarily to meet day to day expenses. Still, before moving ahead, it is crucial to keep in mind that alongside genuine lending institutions, a wave of fraudulent personal loan applications have also entered the lending market.
This poses serious challenges and risks to user data, their money, psychological peace and the economic future of borrowers. To combat digital frauds, credit card scams along with protecting borrowers from shady lending institutions the Reserve Bank of India (RBI) has released warnings, press notes and directions on a regular basis.
These steps highlight the importance of spreading awareness, correct knowledge and financial education with the masses at large. So that such financial crimes can be stopped in their tracks. Keeping the same facts in mind below are five warning signs you should not ignore while you are going about spotting fake personal loan applications:
1. Lack of RBI registration
A common flaw of fake personal loan applications is that they are not backed by RBI. They are also not associated with any RBI registered Non Banking Financial Company (NBFC) or banking institution. The RBI provides a regularly updated list of authorised and permitted NBFCs to help borrowers in making informed decisions. That is why if the lending application you are looking forward to borrowing funds with is not listed then it should be avoided with immediate effect.
Elaborating on the same point, Siddarth, CFO at MinEMI, advises “Although it is not always easy to identify a fraudulent personal loan application, a few quick checks can save you a lot of trouble. Always confirm if the app has RBI approval or is associated with a bank or registered NBFC. Spend a few minutes conducting an internet search to find any reviews or media coverage from reliable sources.”
2. Excessive permissions and privacy red flags
Fraudulent applications often request for unnecessary permission to gain access to a user’s private data files such as contacts, photos, call logs, SMS details. These permissions, if given, are later misused by the lending application to harass borrowers or their families. A fair and legitimate personal loan lending application will only request data which is mandatory for processing the personal loan application and will maintain strict privacy policies.
Dev Patel, Quantitative Research Analyst at 1 Finance, deliberates on the same issue stating “It is important for people to spot fake loan apps because people often seek such options out of desperation and fall for fake loan apps. To start with, check for RBI registration, and verify the developer and app’s legitimacy through official websites. Once installed, be wary of unwanted and excessive permissions (storage/contacts/location). Red flags also include upfront fees before disbursement, and terms that look too good to be true like lower interest rates to lure you.”
3. Unrealistic loan promises
There are several fake loan applications that create lucrative advertisements such as assurance of zero interest or no documentation, no credit checks or instant loan disbursal with negligible interest rates and lenient repayment terms. All such applications are most likely scams.
Genuine lending institutions follow rules and regulations along with strict KYC protocols. They evaluate the creditworthiness of borrowers before approving any personal loans or any other kind of credit lines.
4. No clear contact or customer support
If you will check carefully you will find that fake loan applications often skip providing any legitimate physical office address, working customer support numbers (to create a health feedback loop) or a designated working email address to raise and resolve customer grievances. All of these are major red flags. All RBI permitted lenders must clearly disclose such information and ensure that they do provide customers with proper customer support and grievance redressal mechanisms.
5. Abusive and threatening recovery practices
Time and again victims of such fake loan applications report threatening recovery calls, abusive messages, threats of physical violence against self or family, public shaming by fake recovery agents. Even without having taken an actual loan sometimes. These tricks and tactics are illegal, against the rule of law and generally a clear signal that the lending application in itself is a scam.
Key warning signs of a fake personal loan app
| Red flag | What it means |
|---|---|
| Not listed on RBI website | App is not a registered lender, avoid using it |
| Asks for unnecessary permissions | Possible misuse of data for harassment or fraud |
| Instant loans with no KYC | Likely scam using fake offers to gather your information |
| No physical contact details | No customer support, difficult to trace or lodge complaints |
| Threats or harassment on repayments | Unauthorised collection tactics, often without actual loan disbursal |
Note: The data above is for educational and illustrative purposes. Always verify apps from the RBI database or through official mobile app stores before proceeding.
Therefore, staying alert and informed at all stages, is your first line of defence against digital loan frauds. Whenever you are faced with doubt don’t proceed, report suspicious activity and applications to the concerned authorities to protect your financial wellbeing.
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