Gold loan is offered by banks and other lending institutions as a secured loan to borrowers who can offer their gold articles as collateral. These loans are designed to help borrowers meet their financial needs. Similar to other loans, borrowers of gold loans are required to pay EMIs that could be monthly, quarterly, or yearly.
Due to unexpected situations, a borrower may not be able to repay the loan on time. If a gold loan remains unpaid for a long time it can have certain consequences. Here are some of them:
- Penalty fees: A bank or lender may charge penalty interest on the pending loan amount starting from the due date of the EMI.
- Reminders: Banks or lenders may send text messages/reminder calls/letter in case the gold loan has been overdue for a long time. To avoid major contingencies, a borrower can request for reset of the repayment schedule by approaching the bank or lender.
- Auction: If a borrower does not make full repayment of a gold loan within the period of the loan, the bank or lender has the right to sell or otherwise dispose of the gold items through public auction. However, the lending institution must inform the borrower at least two weeks before auctioning the pledged gold.
Non-payment of a gold loan can also have a negative impact on one’s credit score and overall credit history. This, in turn, can result in lower chances of getting a fresh credit or loan in the future. Therefore, it is important to repay a gold loan as per schedule.