A gold loan is an expensive & most secured loan that is offered by the financial institutions so that the borrowers can meet the immediate financial requirements of the customers. In return for the investment, the borrowers are supposed to give collaterals in the form of gold. The gold will be given back to the individual once the loan has been repaid with interest. Also, the gold rate in India is quite conducive and people can easily afford to get a gold loan.
But sometimes, because for some reason, the borrower is unable to pay the loan on time. This delay in paying the gold loan can lead to consequences, and these consequences vary from one lender to another. The actions that are taken by the lenders also vary. Therefore, the borrower needs to pay gold loans on time. If not, then following are some of the consequences that an individual might face for defaulting on gold loan:
Gold Loan Rate?
Credit score goes down:
A credit score shows the history of the individual with regards to his/her loan repayments. When an individual applies for a loan to the bank, they first check the credit score rating of the individual. After the bank has gone through the credit score, the loan application is either accepted or rejected. So, a default on the gold loan is going to lead to the downgrading of the person’s credit score. Even if the individual has cleared the loan, the banks are going to charge more interest.
Loan repayment reminders:
Even if the individual misses a single loan instalment, reminder calls start to come in until the individual makes the payment. This is done correctly so that the borrower does not come up with the excuse that a reminder was not given to them.
High Penal Interest:
Many lenders charge penal interest as well if the payment of loan instalment is not made on time. These penal interests are generally more than the normal interest rate that the borrower is going to pay for the gold loan. The rate at which the individual is going to be charged differs from one lender to another. But, usually, it is between 1% and 7% per annum.
Lenders may take legal action:
While making the loan payment, lenders usually allow a single or two slip-ups. But if the same problem arises and is continued for three consecutive months or more, the borrower has declared NPA or Non-Performing Asset. If the individual keeps on ignoring continuous reminders given by the lenders, then the lender can send a legal notice at the individual’s registered address. The advice will communicate with the individual the need to pay up the outstanding amount as soon as possible within a specific time frame.
Your collateral gets auctioned:
If gold loan instalments are not paid on time, then the gold articles of the individual will be auctioned by the bank. Nonpayment of the loan instalment by the individual even after the final notice date is going to put up the gold articles in danger. Auctioning is the last resort for the lenders if the individual does not pay the loan instalments. There is no chance for the individual to argue against it as the lender has the authority to take possession of the gold articles of the borrower to recover the amount of loan.