TomorrowMakers

Gold is more than just a precious metal in India. It is a symbol of wealth, status and tradition. It is also a source of quick cash when you need it. Many people take gold loans from gold loan banks and NBFCs by pledging their gold jewellery as collateral. How can gold loan default impact you? How will it affect your credit score and your future borrowing prospects? In this article, we will answer these questions and more.

Highlights:

1. Gold loans: Low interest, easy processing, short tenure

2. Gold loan default: Late fees, higher rates, legal action

3. Avoid default: Contact lender, consolidate debt

4. Flexibility in gold loan repayment

5. Lenders notify: Before auction, give time to pay

Also Read: Gold loans opens up opportunities for small business

Gold loans (or gold mortgage) offer borrowers with lower interest rates, easy processing, and multiple repayment options. However, borrowers should be aware of the consequences of defaulting on their payments, such as damage to their credit score, legal action, late fees, and more. To avoid defaulting, borrowers should choose a repayment option that fits their budget and ensures timely payments.

How does gold loan work?

• Gold loans in India is popular way to borrow funds with lower interest rates, easy processing and multiple repayment options.

• These have relatively shorter repayment tenures, typically 24 months for long-term loans and 6 months for short-term loans.

• These are secured loans with moderate conditions that allow even borrowers with low credit score and history to apply.

• Defaulting on gold loan repayment can have multiple consequences, such as increased interest rates, damage to credit score, and more.

• To avoid gold loan default, borrowers can contact lender for repayment plan or consolidate debt with personal loan.

Securing gold mortgage, timely repayment of gold loan instalments

If the borrower fails to pay gold loan instalments on time, the lender can auction the gold after giving two weeks’ notice. The borrower should respond to the notice and pay the due amount or negotiate with the lender for more time or part-payment.

How to choose the right gold loan repayment option?

• Late payments may incur penal interest of 3-12% p.a. depending on the lender
• Gold loan repayment methods vary according to the borrower’s preference and situation
• Monthly repayment: pay both principal and interest every month
• Interest-only repayment: pay interest regularly and principal at the end
• Partial repayment: pay any amount of interest and principal anytime
• Bullet repayment: pay both interest and principal at the end of the tenure

Stay on top of your loan

Lenders notify before suing gold loan defaulters. They give time to pay dues and remind regularly. Reminders warn about credit score and gold loss. Borrowers should check repayment ability and negotiate the plan.

Also Read: 5 Myths about gold loans you shouldn't believe

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