The lenders must thoroughly revise the loan application process to ensure the process goes error-free and without any fraud. Many financial institutions investing in commercial loan underwriting software to keep an eye on the frauds. The software makes the task easy for banks as it displays a transparent picture of loan takers and prevents the higher chances of fraudulent activities. 

Fraudsters find convenient ways to obtain a loan for personal or commercial purposes using a vague identity that impacts financial institutions or money lenders. There are three major types of loan frauds that present while processing unsecured loans. Let’s know about them!

➤Application Fraud

The most common reports of fraud are of application fraud. This is due to when a borrower submits misleading information. The borrower tries to present stolen or false information innocently. Discover a few instances of application fraud:

• Identity Theft – The borrower steals someone’s identity and processes the loan. Nothing to worry about if the reliable loan underwriting process software has a strong verification system to detect fraud. 
• Fake Bank Account – Here the applicant acquires a fake birth certificate, name, and other personal documents that look like a true picture but contain endless false information. The applicant set the bank account with such details. Hence, make it easy to have a loan with a fake bank account. 

➤ Information Fraud

In information fraud, breached or compromised information is used to access a bank account, sign up for loan applications, and avail other bank facilities to defraud lending institutions.

• Web Scraping – Here, fraudsters make the best use of the internet and mainly social media platforms or websites to gather individual information. They seek data from online registrations done by people. 
• Account Hacking – It’s a serious cybercrime. Fraudsters hack the bank account and apply for a loan through that account.
•  Loan Phishing – Fraudsters practice by sending emails to unsuspecting individuals pretending to be their financial institution. One can detect such emails with a little vigilance.

➤Asset Fraud

Asset fraud happens when someone steals cash or kind in the process of the loan or transactions. Discover some usual ways listed below:

• Fake Bankruptcy – This occurs when an asset or income is kept as a secret and filing for bankruptcy to seek a loan to pay off debtors. Such fraudulent practices are done to protect certain assets.
• P2P money transfer – This is an online fraud while making transactions using a bank or any other third party applications. Ensure to use secure apps for making payments.

Have a well structured and secured LOS system improvised the loan activity of financial institutions as financial loss is very hard to recover. Traditional loan methods have more risk. In this digital era, use advanced ways to sustain the business.