How to Spot Red Flags in Pre-Approved Loan Scams

Check if reference number, date of loan approval are within the same financial year, as no bank asks for legal fees

How to Spot Red Flags in Pre-Approved Loan Scams
Fakhari Sarjan 25 May 2021

You receive a call from an enthusiastic, overzealous, and charming executive claiming to bring you the news of a pre-approved loan. Take a moment and stop yourself from acting on this phone call. More often than not, such calls are made by fraudsters who are on the lookout for someone they can take advantage of and make easy money.

Beware of fake offers on Pre-approved loans

Most of the pre-approved home or personal loan frauds begin with a simple phone call from a so-called lender who offers you great incentives and interest rates on the loan. They make a lot of promises and claim to get you guaranteed approval. That right there is the first sign of a loan scam. There can never be a 100 per cent approval guarantee. There are just too many variables in between the application of the loan and it is sanctioned to have a guarantee for the loan approval.

As the number of online loan scams increases per day, here are some pointers that act as a red flag and help you identify fraud. Pay attention to the details and avoid being duped in order to save your hard-earned money. Listed below are a few things to look out for-

Credit History: Any authentic financial institution or lender offering you a loan would want to run a background check and confirm your credit history. This gives them the faith that you would make for a responsible borrower and return the money on time. Your credit history is a reflection of your performance as a borrower and also shows if and when you have failed to return the money in your previous loans. Therefore, it makes it essential for the lender to take into consideration your credit history and not disregard it. Only in the case of a personal loan scam are the lenders happy with you not having a good credit score, as it prolongs the return duration and allows them to levy penalties.

Loan Approval Letter: The letter you receive as a confirmation from the bank or financial institution for your pre-approved loan is a great way to confirm whether the scheme you are being offered is a scam. Most bank loan scams in India can be caught with their letter of approval. One should always check the following to verify the authenticity of the loan.

1. Check the details of the bank for any spelling mistake or false email ID and website mentioned on the letterhead. Cross-check the website address online and ensure that it matches the one on the letter. Such fake loans are also available at an attractive rate of interest, keep that in mind.

2. The next step is to match the date of approval mentioned to the reference number on the letter. The date of approval should fall within the financial year mentioned in the reference number, which is not the scenario in case of fraud.

3. The stamp and the signature of the individual approving your loan should belong to the same person of authority and the stamp should reflect authenticity.

Legal Fees: You should never trust those who ask you for legal fees for sanctioning your loan. Banks and financial institutions never ask for a fee for your loan approval. Any caller who is eager for you to sign the deal and asks for an upfront payment is trying to lure you into a trap and should be reported. If and when banks levy some charges for your loan, they deduct the amount from your loan money and then transfer the balance into your account. So, beware of such fraudsters who claim to bring you the best offers for a pre-approved loan.

The signs mentioned above are some of the biggest red flags when it comes to pre-approved loan scams in India. Watch out for them and keep your hard-earned money safe. If you are a victim of such a scam, report to the cyber-crime cell and the police station of your area.

Whenever dealing with loan documents and approval procedures, make sure you check and verify all the details minutely. With the approval letter, you must keep your eyes open for spelling errors, the correct official website and email ID of the bank. Remember, the reference number and date of approval should be within the same financial year and none of the banks or financial institutions would ever ask for a legal fee. These are small but essential details that will help you differentiate between a loan scam and an authentic lender.

The author is Chief of Risk, Bajaj Finance Ltd

DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.

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