How to identify and steer clear of education loan fraud?

A report by a credit information company, states that the highest incidences of financial fraud in India are related to consumer loans, followed by credit cards. Among these, the most common type of fraud is identity theft. These loan frauds have resulted in thousands of people losing their hard-earned money.

Although several kinds of loans are available in India, maximum loan frauds are related to education loans. It’s because they are given to students who are still in the nascent stages of their careers.

Let's learn more about it in detail.

Five common education loan frauds in India
 

Below are the five most common student loan scams you might encounter and how you can avoid falling prey to them.

• Asking for an advance fee

You may come across a lender that’s offering a high loan amount at a competitive interest rate. However, they may ask you to pay an advance fee to apply for the loan. This is a definite sign of loan fraud. Even the most reputed private lenders are not supposed to seek an advance fee for providing an education loan.

• Loan consolidation scam

If a company approaches you with a new loan for consolidating your education loan at an affordable interest rate but asks you to pay a consolidation fee, it can be a loan fraud. There are no consolidation options for student loans since they’re already offered at the lowest interest rates by lending institutions.

• Debt elimination scam

You may get a call from a company that’s promising to get rid of your education loan debt at a nominal fee. Make sure you do not entertain such calls. It can lead to loan fraud. Remember that there’s no way to eliminate your debt unless there is an unforeseen situation, such as the death of the borrower. Even in such cases, only the original lender has the right to write off a loan.

• Request for personal details

Often, fraudsters pose as fake education loan providers and ask you to submit your personal and financial details so that they can disburse the loan amount. This can be an attempt to carry out a loan scam. No lender is supposed to seek details such as your credit card number, internet banking PIN or password, etc. 

• No physical address or contact information.

Although it’s common for lenders to provide online education loans, they must have a physical address. No financial institution can operate without a physical office. If the lender has no physical presence, it can be fraudulent. Before signing any documents, check the details of the education loan provider. Also, make sure that the company is registered with the Reserve Bank of India (RBI).

Also read - 4 Facts about Education Loans that you might not know

To conclude
 

No one can dupe you of your hard-earned money if you stay diligent while applying for a student loan scheme. With IDFC FIRST Bank, you can get a student loan of up to Rs 1 Cr* for more than 25000 courses across 3200+ universities. As one of India's most reputed banks, IDFC FIRST Bank offers maximum transparency during the loan verification process. For more details, click here.



 

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