Today personal loans have become a popular financial tool, allowing borrowers to cover both emergency and non-emergency needs.
However, as with anything popular, there are fraudsters and scammers looking to swindle money out of you by offering too-good-to-be-true loan terms that present a nasty surprise later.
To prevent such disasters, here are some common red flags you should watch out for when applying for a personal loan.
No credit check required
Every lender in the market will thoroughly screen your credit report and CIBIL score before giving you the go-ahead on your loan application. If a lender doesn’t carry out a credit check or approves your application too easily without scrutinising your credit history, you may be dealing with a scammer. It’s best to stay away from such lenders.
High advance fees
If your preferred lender asks for an advance fee for document verification and processing to be paid in cash before your loan is approved, they may likely be scamming you. Yes, some lenders require you to pay such a fee. But legitimate ones mention this in the online personal loan agreement itself and never ask you to pay it based on a verbal agreement.
Additional Read: How Not to Fall Prey to Hidden Charges of Personal Loans?
Hefty prepayment penalties
Before you finalise a lender, make sure to review the additional charges you’ll incur on closing your loan early. Typically, a lender charges prepayment penalties and foreclosure charges.
Understand the terms before agreeing upon a loan offer. Carefully go through the loan agreement, which will mention all the charges involved, including fees charged in case you prepay the loan. Check if your lending institution is upfront about these charges.
Urgent applications and limited time offers
If a lender tempts you with lucrative loan offers and coaxes you to apply for loan within a time limit, it might very well be a scam. This is a pretty common technique swindlers use to ensure that you get no time to run a background check on them.
Odd means of communication
Most reputable lenders always target you through mass media or email. They won’t target you via phone, SMSs, door-to-door solicitation. If you find someone pestering you with untimely repeated calls and targetting you through these channels, be on your guard, as they’re almost always an invitation for trouble.
Additional Read: Things To Do If Your Personal Loan Gets Declined
No physical address
While most lenders extend loans online, when choosing a lender, make sure they have a physical location. Run their name through Google Maps to be sure. If you don’t find any physical addresses, it’s best to avoid the lender. Many scammers ensure they cannot be found to avoid legal repercussions.
Final word
While looking for lenders, conduct in-depth research and compare various offers. Also, ensure that the lender has a physical address, doesn’t charge extra fees, and contacts you through verified channels.
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