{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.indusind.com\/iblogs\/fraud-prevention\/how-to-spot-personal-loan-fraud\/#BlogPosting","mainEntityOfPage":"https:\/\/www.indusind.com\/iblogs\/fraud-prevention\/how-to-spot-personal-loan-fraud\/","headline":"How to Spot a Personal Loan Fraud Before it is Too Late?","name":"How to Spot a Personal Loan Fraud Before it is Too Late?","description":"Personal loans have become a go-to solution for many Indians, offering quick funds with minimal paperwork. Whether it\u2019s for home renovations, medical expenses, or an unexpected financial crunch, these loans provide much-needed flexibility. But as digital lending grows, so do the risks. Fraudsters are constantly finding new ways to exploit borrowers through personal loan scams....","datePublished":"2025-03-21","dateModified":"2025-05-29","author":{"@type":"Person","@id":"https:\/\/www.indusind.com\/iblogs\/author\/indusind_bank_pfx_team_indperformics-com\/#Person","name":"CONVONIX Antony","url":"https:\/\/www.indusind.com\/iblogs\/author\/indusind_bank_pfx_team_indperformics-com\/","image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/7d15b864167d3868c12ffdda340cc1c9?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/7d15b864167d3868c12ffdda340cc1c9?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"IndusInd","logo":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","width":201,"height":86}},"image":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/Signs-of-Personal-Loan-Scam-You-Should-Know.jpg","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/Signs-of-Personal-Loan-Scam-You-Should-Know.jpg","height":288,"width":764},"url":"https:\/\/www.indusind.com\/iblogs\/fraud-prevention\/how-to-spot-personal-loan-fraud\/","about":["Fraud Prevention"],"wordCount":1958,"articleBody":"Personal loans have become a go-to solution for many Indians, offering quick funds with minimal paperwork. Whether it\u2019s for home renovations, medical expenses, or an unexpected financial crunch, these loans provide much-needed flexibility.But as digital lending grows, so do the risks. Fraudsters are constantly finding new ways to exploit borrowers through personal loan scams. Fake loan apps, phishing calls, and too-good-to-be-true offers are everywhere. If you’re not cautious, you could end up losing money, personal data, or worse\u2014fall into a cycle of fraudulent debt.So, how can you tell a legitimate lender from a scammer? Let\u2019s break down the most common loan frauds, their warning signs, and real-life cases\u2014so you can protect yourself before it\u2019s too late.Types of Personal Loan ScamsFraudsters are getting smarter, constantly evolving their tricks to catch unsuspecting borrowers off guard. Here\u2019s a closer look at some of the most common types of personal loan frauds, how they work, and real-life examples that highlight their devastating impact.1. Fake Loan Apps & WebsitesHow This Scam Works?How to Spot the Red Flags?You come across an app or website promising instant loans\u2014no paperwork, no credit checks, just quick approval. But once you apply, things take a turn. Either they steal your personal data, demand upfront payments, or harass you later with exorbitant charges.– The app isn\u2019t available on trusted platforms like Google Play or the App Store. – The website looks poorly made, with missing contact details or broken links. – Loan agents ask for KYC documents via WhatsApp or personal email instead of secure portals. – No physical office address or a valid customer support number.A Real-Life Case of Fake Loan ApplicationsEarlier this year, the Enforcement Directorate (ED) cracked down on a massive \u20b9719 crore loan scam linked to fraudulent loan apps. These apps, promoted through unofficial websites and social media, lured borrowers with attractive loan offers. But instead of helping, they misused borrowers\u2019 personal data for extortion and harassment.2. Upfront Fee ScamsHow This Scam Works?How to Spot the Red Flags?You\u2019re told you\u2019ve been pre-approved for a personal loan\u2014no income proof required, no credit checks. But before the loan is processed, you need to pay a small fee for verification or processing. Once you transfer the money, the so-called lender vanishes.– Loan approval without checking your credit history. – Requests for fees via UPI or personal bank accounts before disbursal. – No official loan sanction letter or agreement after payment.A Real-Life Case of Upfront Fee ScamsEarlier this year in Bengaluru, the Cyber Crime police registered a case against unknown people for cheating people on the pretext of offering instant loans. The criminals were misusing the name of a private company, that runs a digital lending app, by creating email IDs resembling the company\u2019s name.The scammers were sending emails in bulk to random unsuspecting people, offering them instant loans. They duped several people in the name of collecting \u201cprocessing fee\u201d  with the promise of loan approval. The loan never came through.3. Phishing & Impersonation ScamsHow This Scam Works?How to Spot the Red Flags?You receive a call, email, or SMS claiming to be from your bank. The agent offers you an exclusive pre-approved loan\u2014but there\u2019s a catch. To proceed, you need to share your OTP, Aadhaar number, or login details. Within minutes, scammers gain access to your bank account and wipe out your funds.– Emails from generic domains (Gmail, Yahoo) instead of official bank addresses. – Links directing you to websites that don\u2019t match the bank\u2019s official portal. – Pressure tactics\u2014asking for immediate action, threatening loan cancellation.A Real-Life Case of Phishing & Impersonation ScamA Bengaluru resident lost \u20b95.8 lakh after clicking on a fake loan approval link received via SMS. Cybercriminals, posing as bank representatives, tricked him into entering his credentials on a fraudulent website.Also Read: Digital Banking Frauds and its Types4. Loan Restructuring ScamsHow This Scam Works?How to Spot the Red Flags?During financial crises\u2014such as the COVID-19 pandemic\u2014fraudsters pretend to be from banks or NBFCs, offering fake loan restructuring or moratorium extensions. Their goal? To extract KYC details, bank credentials, or even scam borrowers into paying fake processing fees.– Calls or messages about loan restructuring when you never requested it. – Requests for Aadhaar, PAN, or OTPs over phone calls or WhatsApp. – No official confirmation from your actual lender about the offer.5. KYC Update ScamsHow This Scam Works?How to Spot the Red Flags?You receive a message saying, \u201cYour loan account will be blocked if you don\u2019t update your KYC immediately.\u201d Panicked, you share your Aadhaar, PAN, and bank details\u2014only to have them misused for fraudulent loans.– Threatening messages urging immediate action. – Requests for full KYC over phone calls or WhatsApp. – Links leading to suspicious, non-bank domains.A Real-Life Case of Loan Restructuring Scam & KYC Update ScamDuring the COVID-19 lockdown in 2020, fraudsters leveraged the RBI\u2019s announcement of an official loan moratorium to trick unsuspecting borrowers.One such case reported in Mumbai involved cybercriminals calling individuals, pretending to be from their banks, and offering to “process” the moratorium request. Borrowers were asked to share their KYC details and OTPs for verification.Once the fraudsters obtained this data, they not only gained access to the victims\u2019 bank accounts but also misused their documents to apply for instant personal loans. This elaborate personal loan scam left many borrowers with unauthorized debts, further compounding their financial difficulties during the pandemic.Identity Theft & Application ScamsHow This Scam Works?How to Spot the Red Flags?Scammers use stolen Aadhaar and PAN details to apply for loans. Victims often find out only when they receive recovery calls for loans they never took.– Sudden drops in your credit score. – Receiving statements for unfamiliar loans. – Alerts about unauthorised credit inquiries.A Real-Life Case of Identity Theft & Application ScamEven financial influencers aren\u2019t immune. In 2024, an investment analyst discovered that loans had been taken in his name using his stolen Aadhaar and PAN details. He later faced harassment from recovery agents demanding repayment. You can read more about the case here.Also Read: Jump Deposit UPI Fraud: Tips to Safeguard Your MoneyHow to Verify the Legitimacy of a Personal Loan OfferAlways check if the lender is RBI-registered or an authorised NBFC.Visit the lender\u2019s website directly \u2014 never click on links from unsolicited messages.Download loan apps only from trusted stores, never via forwarded links.Call the lender\u2019s official customer care to cross-check any offers.Scan customer reviews on RBI Sachet or social media to spot red flags.Remember \u2014 real offers don\u2019t come with pressure tactics or deadlines.What to Do If You Suspect or Fall Victim to a Loan ScamFile a complaint at cybercrime.gov.in.Immediately inform your bank to freeze suspicious transactions.Change passwords across banking, email, and linked apps.Alert credit bureaus to place a fraud alert on your profile.File a police complaint and preserve all proof \u2014 messages, screenshots, and payment records.Share your story with family and friends so they can stay alert.Wrapping Up!Online loans offer convenience, but they also attract fraudsters. Scammers prey on urgency, making it crucial to pause, verify, and think before acting.If an offer seems too good to be true, it probably is. Staying informed about personal loan scams could save you from financial and emotional stress. Always choose verified lenders, double-check offers, and never share sensitive details without due diligence. A little caution today can save you from big troubles tomorrow. Stay safe, stay informed!Share This:"}