An automobile engineer from Karnataka’s Udupi district lost ₹4.37 lakh after falling victim to a fraudulent loan application scam, according to a recent report by Deccan Herald. The incident highlights the rapidly growing risk of instant loan disbursement and ongoing advancements in lending.

How did the scam take place?

The incident began when the victim downloaded a mobile application and availed a short-term loan of just ₹12,000. Upon clearing the loan, he was lured into borrowing more. Following this, loan application operators began imposing exorbitant charges, interest expenses, and hidden fees, along with penalties.

The fear of action and uploading his personal mobile data on social media eventually forced the victim to pay ₹4.37 lakh through various transactions. A police complaint has been registered, and the case is under investigation.

Still, this case serves as a serious warning to all future borrowers, so that they can safeguard themselves from similar financial scams, misappropriation of funds, and damage to their credit integrity.

Keeping the above facts in mind, here are five key lessons every borrower must keep in mind before going ahead with any new personal loan or credit card applications:

I. Verify application legitimacy

Sometimes, the need for new funds is so urgent that borrowers even fail to check whether the loan applications are registered with the Reserve Bank of India (RBI) or if they have credible links with other reputable banking institutions or NBFCs. That is why, before accepting any lucrative loan offer, carefully check if the offer is fair, legitimate, and backed by the relevant regulatory authority. Unknown applications providing instant approval are red flags.

II. Read the terms carefully

Hidden fees, short repayment cycles and high penalties are common in scam applications. Always read the interest rate, processing charges and repayment terms before accepting a loan. Never fall for just the assurances provided by the customer support executive, because in the end, it is the terms in the loan contract that matter.

III. Limit application permissions

Many fraudulent applications misuse access to contacts, photos and messages to harass borrowers. Avoid apps that demand excessive permissions unrelated to lending. Furthermore, don’t hesitate to delete such applications from your phone and first have a fair discussion with a certified financial advisor before proceeding with any loan application.

IV. Don’t panic under pressure

Scammers heavily rely on fear and the use of urgency. If you are being threatened or abused, stop payments and report the matter immediately to the police or cybercrime helpline. Even before going ahead with any loan, check out the reviews of the application and the views of past borrowers.

V. Never hesitate and report early

Immediate reporting to cybercrime portals and local police can prevent further losses and help authorities track down fraudulent operators. This is important, as it will not only defend your rights but will also protect future applicants from falling into a similar trap.

Therefore, as digital lending continues to grow, awareness and caution remain the strongest safeguards against falling into such costly traps. Any new borrowing must be done after proper due diligence, background checks and understanding of the risks of personal loans.

Most personal loans come with risks, such as debt buildup, high interest rates, psychological stress, repayment complications, and the possibility of serious legal action in case the borrower defaults. All these factors must be taken into consideration while submitting any new loan applications.

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