Loan Fraud: Easy tips on how to detect and avoid it

  • Updated on: 25 Jan 2024
  • Published on: 18 Jan 2024
Loan Fraud: Easy tips on how to detect and avoid it

Loan fraud instances have increased with advancements in the fintech sector. So, they can happen to anyone who uses financial services. That said, these fraudsters often target individuals who can’t get funding through traditional means, such as:

  • Elderly
  • Students
  • People with no secure job
  • Uneducated adults
  • People with low or no credit scores

Scammers entrap in several ways, which include misusing personal and other sensitive data, leading to financial loss. As such, it’s crucial to identify them and take precautions to safeguard your identity. 

Read on to learn some loan fraud detection techniques, measures for prevention and more. 

What is Loan Fraud? 

When there is any deceptive action during the loan process from the lender or the borrower, it is known as loan fraud. Being a victim of this fraud can lead to substantial financial loss or identity theft. There are many ways such fraud may take place, some of which are:

  • Impersonating reputed banks and lenders
  • Stealing your information to take out unauthorised loans
  • Charging exorbitant and unnecessary fees
  • Completing the process without providing the loan
  • Using your identity to make unauthorised transactions 
  • Promising to eliminate existing debt at a nominal fee

6 Signs of Loan Fraud

These loan fraud detection tips will help you avoid potential identity or monetary loss. 

  1. No Physical Address

Lack of physical address should be a first warning sign. Without an address, catching them can be difficult for the authorities. So, scammers generally don’t have one or mention a fake address. Check the details to ensure you are borrowing from a legitimate lender. 

  1. Non-Disclosure of Fees and Charges

Another common way is when the supposed lender charges multiple hidden fees on the loan without discussing them at the time of application. You will also not find any mention of such charges on their websites. 

  1. Request for Non-refundable Advance

If the lender asks to make an upfront payment for your loan, consider it a red flag. It is one of the most common types of personal loan fraud. Most financial institutions adjust the processing fees in the loan amount after approval rather than before the application process. So, if they are asking for a high fee even before processing the loan, choose another lender.

  1. Sense of Urgency

Some con artists will reach out to you with a ‘limited time offer’ or ‘time-bound scheme’ that ends within a few hours. Genuine companies don’t have such short-term offers and theirs generally are valid for a few days, giving you the time to make a well-informed decision. 

  1. Assured Funding 

When you apply with a genuine lender, they thoroughly assess your eligibility and review your application before approving it. So, they don’t offer any guarantee that you will get the funds. As such, if anyone’s offering a guaranteed approval, you should be cautious and steer clear of it.

  1. Unsolicited Communication

Banks and financial institutions only reach out to you with loan offers if you have enquired or are an existing customer. If you get a call randomly, you must investigate how they got your contact details. Also, make sure you don’t do any of the following: 

  • Respond to their calls or emails 
  • Click on any links 
  • Provide any details 

Also Read: Personal Loan Scams: You Can Be The Next Target

How to Prevent Personal Loan Fraud?

Here are a few tips through which you can avoid being a victim of personal loan fraud:

  • Do proper research on the lender’s reputation and customer feedback
  • Check if the lender’s website is secure
  • Avoid paying upfront fees 
  • Read the terms and conditions carefully
  • Avoid being tempted by offers and schemes that seem too good
  • Check your bank account for a fraudulent transaction
  • Verify the lender’s documents 
  • Stay updated with the latest scams and measures to help you avoid them

Using these loan fraud detection tips, you can easily identify fraudsters and keep your finances and data safe. Borrowing from genuine lenders who have best-in-class security measures is a great way to keep your information secure. Fibe has a PCI DSS App-based journey and ISO/IEC 27001 Certification. As such, you can get funds without any risks or hassles.

With Fibe’s Personal Loan, you can get a transparent loan of up to ₹5 lakhs with a 100% secure digital application process. That’s not all. Our competitive interest rates, quick approval, minimum requirement and no hidden charges give you the ease of simplified, secure and affordable borrowing. Download the Fibe Personal Loan App or visit our website to get started! 

FAQs on Loan Fraud

How do you detect loan fraud?

There are many signs that you may be dealing with a fraudster. Some of these are: 

  • No regard for your credit history and existing credits 
  • Missing physical addresses 
  • Unsecured websites 
  • Upfront fees 
  • Assured approval
  • Extraordinary offers

What is the meaning of loan fraud?

It refers to any activity where the fraudster offers credit to collect your personal information and documents. Once they have your sensitive information, they can apply for loans in your name. 

What to do in case of loan fraud?

In such a case, you must do the following: 

  • Lodge an FIR at your nearest police station 
  • Report the case to the cyber-crime cell through 

How do you detect fraudulent transactions?

Checking your account balance regularly and opting for SMS alerts for transactions can help catch and avoid unauthorised payments.


Our top picks

Can Millennial Stress be Resolved by Financial Wellness?
Finance | 3 mins read
How Organisations Can Measure the Impact of Financial Wellness Programs
Finance | 3 mins read
How Can HR help Overcome Staffing Challenges in the Digital Age?
Corporate | 3 mins read
5 Signs of A Good HR Function
Corporate | 3 mins read