What Are Personal Loan Scams?

Common Types of Personal Loan Scams

Advance Fee Scams

Advance fee fraud is one of the more popular types of scams. Scam professionals will require the target borrower to pay a certain amount up front for the processing, taxes, or documentation connected to the loan.

Since the scam takes place in advance of the disbursement of funds, once the target has paid the fee to the fraudster, they will never pay the loan as promised.

Fake Loan Apps and Websites

Scammers will create fake loan applications that resemble a legitimate lender portal. The fraudulent loan applications concentrate on the term "promised loans," where victims are promised instant loan previews with low-interest rates or qualifying fees to receive the loan.

Phishing Scams

Phishing scams include scammers communicating with individuals via verbal or written email, as if they work for a known financial institution. They trick the borrower into giving personal information like IDs, passwords, and bank details, which they then use to create a fake financial loss.

Guaranteed Loan Approval Offers

Any offers that include “guaranteed loan acceptance” can be a significant warning sign. Real lenders will always check a borrower’s credit, income, and ability to repay before offering a loan.

Scammers provide guaranteed loan acceptance to lure desperate borrowers into paying advance fees or obtaining sensitive data from the borrower.

Impersonation Frauds

Other scammers act like government employees or employees of established banks and NBFCs, informing potential victims that some verification process or additional fees are required for the borrower’s loan request. This gives the victim a false sense of legitimacy to request falsely approved loan acceptance and pay money or provide personal information.

Pressure Tactics

Scammers may also use pressure techniques to create urgency in the violation. They may contact potential victims and tell them that the loan is for a “limited time,” or act as if they need to take quick action to obtain loan acceptance, which will speed up the loan approval.

How to Protect Yourself from Personal Loan Scams

FAQs

What is a personal loan scam?

A scam involving personal loans is a form of fraud in which fraudsters impersonate legit lenders (like banks, NBFCs, or the internet) so that they can have borrowers pay them an upfront fee or reveal personal and financial information.

Though some of these scams boast of instant approvals and low-interest rates, victims will ultimately lose money or fall victim to identity theft.

What are the most common types of personal loan scams?

Some common examples of fraud include advance fee schemes, counterfeit loan applications and websites, phishing scams, guaranteed loan approval offers, impersonation fraud, and pressure tactics.

How can I identify a fake lender or loan offer?

Warning signs include requests for money up front, guaranteed loan approvals, contact information that may not be real, or unsecured websites (the ones that do not say “https://” or do not show a lock icon).

Why are advance fee scams so common in personal loan frauds?

Advance fee scams are effective incentives for scamming because they capitalize on urgency and empty promises. In these types of scams, the scammer will convince a borrower to pay "processing" or "documentation" fees before getting their loan disbursed.

How can I protect myself from personal loan scams?

To protect yourself from personal loan schemes, check the lender's credentials using either official or RBI-registered sources. Ignore unsolicited loan links and never pay upfront fees.

Only share personal details on a secure "https://" website and deny any app permissions that are not necessary, like access to your contacts or photos, to avoid the data from being misused or being a target of fraud.

What should I do if I fall victim to a personal loan scam?

If you've been scammed or consider yourself a victim, contact your local cybercrime cell. You can also file a complaint through the National Cyber Crime Reporting Portal (cybercrime.gov.in) or by calling 1930 (National Cyber Helpline).