Personal loan: A case of fraud has come to light in Pune, where a borrower took a loan of ₹5 crore from a bank against the collateral of a property.
The same asset was later used to raise another loan from a cooperative bank without obtaining a no-objection certificate from the previous bank. The borrowers happened to take the second loan on the basis of a forged NOC.
When the borrower did not repay the loan, this fraud was discovered. The case, although committed against public institutions, teaches us a number of money lessons.
4 money lessons from this case
I. Amount of loan: The loan amount should be small enough to be repaid easily. When the amount of the loan is too big, one may get tempted to raise a fresh loan to repay the previous loan, thus falling into a debt trap.
II. Credibility of borrower: When a loan is obtained through fraudulent means by forging a document, e.g., as explained above, banks would most likely blacklist the borrower. Such practice – whatever the temptation – is a complete no-no.
When you fail to repay the loan, banks inform the credit information companies, leading to a loss of credit score. When a credit score drops on account of non-repayment of a loan, the customer loses credibility to raise a fresh loan.
III. Authenticity of collateral: In this case, the borrower used duplicate documents after filing a false complaint claiming that the original documents were lost. If you plan to give a loan to a friend or someone you know in return for collateral, make sure you check the authenticity of the collateral.
IV. Financial discipline: Needless to mention that financial discipline is key to good financial health. One should spend only after keeping aside what you need to save is vital. And if there is a need to raise a loan, the amount should be as low as possible.