Protect Yourself From Gold Loan Frauds

Learn how to protect yourself from gold loan fraud in India. Discover the key questions to ask before applying for a gold loan to ensure you’re dealing with a genuine company and getting fair value for your gold.

4 Jul,2023 10:41 IST 1793 Views
Protect Yourself From Gold Loan Frauds

In today’s digital age, many of us prefer to turn Google to research any of our requirements. And that is the perfect baiting ground for fraudsters and scammers. From digital gold to getting a gold loan, from credit cards to work-from-home offers – its impossible to hazard a guess regarding the percentage of genuine websites to fraudulent ones.

Today, getting a gold loan in India is relatively easy. With increasing unemployment rates and layoffs, taking a gold loan to tide over a difficult period is an appealing option. Today there are a host of banks and NBFCs that offer loans with gold as a collateral to individual borrowers. So, if you are considering a gold loan, it is useful for you to arm yourself against a gold loan fraud.

This blog posts a number of questions that you, as a potential borrower, need to ask, in order to avoid being a victim of loan fraud.

The first question to ask yourself is “Is this company a genuine company?”. If you are trying to pin-point the best company for your gold loan through online research, you will find that there are many companies offering gold loans online. They offer to come to your house, ascertain the value of gold and collect the gold at your doorstep. While this is extremely convenient, you must ensure that the website is genuine and that the company has a physical address and office you can visit at any time. It is best if the office is located in your city or near to your place of residence. Further, it is imperative for you to ensure that the company is registered and has a mandate of dealing with gold loans.

If the company is not genuine, there are a number of ways in which the gold loan fraud could be perpetrated. You may surrender your gold with the assurance of the loan, but the loan money is never deposited in your account. Or, you may get the loan, but never get the jewellery back after repayment. Yet, at other times, the jewellery you get back after repaying the loan could be fake. Be especially wary of companies who ask you to pay the gold loan processing charges before depositing the gold loan into your account. In addition to never getting the loan, your account may be drained of whatever money it holds by the scamster.

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The second question to ask yourself is “Am I being offered fair value for the gold?” While answering this question, keep in mind that the loan offered depends on the weight of gold and its purity. If you are putting up jewellery as a collateral, the price you would have paid for it would also include a making charge. This could be a significant portion of the cost-price depending on the jeweller and the intricacy of craftsmanship. In respect of purity, the higher the karat value, the higher the purity. A gold bill from a standard jeweller will have the karat value, weight of gold, as well as the making charges clearly indicated. So, check the bill of purchase to help you understand the weight of the gold you are offering against the loan.

While ascertaining the fair value of gold loan offered, do keep in mind that most institutions offering gold loans in India offer loans from %mention by RBI of gold value. If someone offers you less, there is a chance that this could be a loan fraud. Keep in mind that in the unfortunate circumstance that you are unable to repay the loan in the given time-frame, you will not get your gold back. Thus, you would have been really underpaid as compared to the true value of gold.

The third question to ask yourself is “Am I being offered a reasonable rate of interest?” To answer this, you must compare the interest rates of different companies offering gold loans in India. Any rate that is too high indicates a company that is unscrupulous and which indulges in the unethical practice of preying on a person’s desperation. If a platform offers a low rate of interest, the chances are that the platform is trying to lure you into snapping up the opportunity without doing an authenticity check. You may surrender your gold in a hurry, without getting the promised loan.

Thus, before applying for a gold loan, do spend time in diligent research. While the internet does provide useful information, remember that more than 40% of web-traffic is generated by bots! So, back-up your internet research through first person accounts from family and friends. Visit the company office. Be sure you are comfortable with the people you are dealing with. If, despite your best efforts, you still become a victim of fraud, report it to the police at the earliest.

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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