Common personal loan scams every borrower should watch out for

Representative image

One of the oldest tricks in the book is the scammer who pretends to be from a bank or NBFC. They’ll send you an SMS or email saying your loan has been “pre-approved” and you just need to pay a processing fee. The moment you transfer the money, they vanish. Remember, no genuine lender asks for upfront cash before disbursing a loan.

Apps that look legit but aren’t

Shiny-looking loan apps pop up on the Play Store every month, promising instant loans with zero paperwork. Many of these are unregulated and collect personal data—contacts, photos, even location—to harass borrowers if they don’t pay up. Always check if the app is RBI-registered and linked to a proper NBFC before downloading.

Guaranteed approval scams

Some fraudsters lure borrowers by claiming “100% guaranteed approval.” Real lenders never make such promises, because loan approval depends on your credit profile. If someone is pushing you to sign quickly with the assurance that “anyone can get it,” that’s a red flag.

Fake websites and phishing traps

Scammers often create look-alike websites of popular banks and trick borrowers into entering PAN, Aadhaar, and banking details. Once you type in your data, it’s used for identity theft. Always double-check the web address and never share sensitive details through unsecured links.

Emotional blackmail and threats

Some fraudulent loan operators use intimidation once you fall into their trap—harassing you with abusive calls or threats to leak your private information. This isn’t how regulated lenders work. RBI has repeatedly warned borrowers to avoid unverified platforms and stick to banks or NBFCs under its supervision.

How to stay safe

The golden rule: if it feels too easy or too good to be true, it probably is. Always verify whether the lender is RBI-registered, read reviews, and never make upfront payments. A little caution upfront can save you from financial loss and mental stress later.

FAQs

1. How do I know if a loan app is genuine?

Check if the app is partnered with an RBI-registered NBFC or bank. You can verify the list on the RBI website. Avoid apps that ask for unnecessary permissions like access to your gallery or contacts.

2. What should I do if I’ve already paid money to a fake lender?

Immediately file a complaint with your local cybercrime cell or through the National Cybercrime Reporting Portal (cybercrime.gov.in). Also, inform your bank to block any further suspicious transactions.

3. Are processing fees always a scam?

Not necessarily. Legitimate lenders may deduct processing charges from the loan amount after disbursement. But if someone is asking you to transfer money in advance to “unlock” your loan, that’s fraud.