How to Verify the Lender Before Taking the Personal Loan ?

Personal loans are a great option to fund your needs and liabilities. Most people are in urgent requirement of capital when applying for loan support at banks and NBFCs. This immediate rush for availing money often led to traps, causes financial stress, psychological pressure, and even money loss.

Several hackers, scammers and shell companies offer personal loans only to scam you. They offer attractive loan features and dupe your money in the name of processing charges, verification, etc. The prime reason for such happenings is the lack of financial literacy and awareness of personal loan features.

If you know someone who is the victim of a fake lender or want to be sure before applying online, go through below mentioned checks about a lender, and after satisfaction move ahead with the application.

Five Ways to Know and Verify Lender for Personal Loan

1) KYC your Lender

Reserve Bank of India is the central regulatory authority of the financial system in India. All banks, NBFCs and financial bodies come under the purview of the RBI. So, you must check whether the lender is working according to the guidelines given by the Central Bank. 

RBI issues notifications regarding rules and regulations from time to time on their website or other platforms. Follow them and verify if the lender following the guidelines or not. Lenders go through complete Know Your Customer formalities before loan amount disbursal, similarly, you should also conduct lender checks including registration number, years of service in personal loans category, etc.

If the lender does not have sufficient documents and information on the website, do not apply for a personal loan at their mobile app or website. The lending company must be registered with the Ministry of Finance, Government of India, and Reserve Bank of India.

2) Analyse Lender Website

The website should be updated with all the relevant information about the personal loan and company details. Check for company registration, Company Identification Number (CIN), Certificate of Registration (CoR), Details of Senior Management, and relevant information about products and services offered.

If the company is fake, they cannot provide vital company information. There will be irregularities in documents, information within documents like dates, people names, etc. Go through minute details because any missed information could land you in financial fraud.

If found any doubtful information on the website, stop all communication immediately.

3) Loan Approval Process

There are no shortcuts or skipping the loan approval process. Every lender must follow certain steps and guidelines to process the personal loan application. If any mobile app or website offers a personal loan without crucial steps such as “Get a loan without income proof” “Fund your personal needs with a quick loan without PAN details or ID proof”

These types of unrealistic or had to believe taglines are red flags. Understand them and beware of such applications and websites. 

Almost all the leading banks and NBFCs are offering loans online, apply at lenders such as SBI, ICICI Bank, Apna Paisa, etc. These are established names, and you can assure of them for safe personal loan processing.

4) Verify the Physical Address of the Lender

Despite you are applying online, you must check the physical address, contact number, and other details of the lender. This is a big checkpoint for identifying shell companies.

A company should be registered with a physical address within India under the Ministry of Corporate Affairs and Reserve Bank of India. There should be minimum staff at the office and a working contact number.

Verify address personally or through some acquaintance and check lender’s registration status on the MCA website.

5) Online and Offline Customer Reviews

Existing customers know better, so, ask them. Talk to people who have taken personal loans from the lender, you are communicating with. Check online reviews on Google and the website. 

Companies nowadays are hiring people for fake reviews and posting online. So, it will be better if you find existing customers offline. These people will provide the most practical and no-filter reviews about the lender. Talk to them, you will have relevant information to arrive at a genuine decision.

Crucial Things to Consider Before Applying for the Personal Loan

After considering and researching the lender according to the given ways, you must consider the following points before finally going ahead with the personal loan application.

  • Use comparison websites to check offers from different banks and NBFCs
  • Calculate monthly installments through the EMI calculator and check your eligibility
  • Pre-payment charges, processing fees, and any other charges during the personal loan tenure
  • Terms & conditions of the lender

RBI Initiatives to Curb Online Loan Fraud

To control and regulate online lending frauds, RBI has taken several steps in recent months. On 31st January 2021, RBI formed a Working Group to study all aspects of digital lending activities including lending through online platforms and mobile apps by RBI regulated and unregulated entities. 

The government of India banned twenty-seven online loan applications for fraud practices.

Concluding Thoughts

A personal loan is an unsecured loan, but you should not delay loan repayment and EMIs. If you delay repayment, it will adversely affect your credit score. Any future loan application like home loans, business loans, and cards will be difficult if the credit score goes negative.

The democratization of technology has made AI and ML-based applications for everyone. It is much easier to create an app and use it for duping people for wrong intentions. We need to be extra careful while applying for personal loans online and do all checks before finalizing the lender.

It is advisable to go with a reliable bank or NBFC with a nationwide network and strong books. Never get lured by impractical offers and benefits of personal loans online.

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