Know What Happens When A Borrower Fails To Repay Gold Loan

How to pay gold loan online
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If you fail to repay a gold loan, what will happens?

If you fail to repay the gold loan, you Receive Repeated Reminders. With every loan comes calls, e-mails, letters, and text messages reminding you of the payment amount, due date, etc. A failure to repay even a single instalment will prompt the lender to send repeated reminders. Much of this is done to keep the borrower apprised of the default and its consequences.

Impose by Penal Interest 

A gold loan lender may impose a penal interest an additional interest over and above the monthly draw for the missed months. This could range from 1% to 7% per annum.

Auctioning Gold

The failure to repay (three consecutive payments or more) will ultimately lead to the gold being auctioned off by the bank or the financial institution since the gold has been pledged as collateral against the loan. It is now a non-performing asset and will be sold off for recovery. Now the auction is a fair price sale, but the jewellery is sold only for the value of the gold. It means you will lose any making charge you may have paid. Will returned. Will return any gemstone fitted in the gold to you and any recovery made more than the gold amount. If any due interest is also recovered from the auction, proceeds are still a considerable loss to the borrower.

Affects Credit Score

All gold loan borrowers must note that defaulting on any loan, including a gold loan, will adversely affect your credit score. A credit score is a three-digit number that denotes the creditworthiness of an individual based on their income and past credit history. It is provided by CIBIL, Experian, Equifax, and Highmark. A lower credit score will make it difficult to obtain any loan or even a credit card in the future. Failure to repay a gold loan may bar you from being eligible for receiving any more loans in the future.

What is a gold loan?

A gold loan is a loan that you can receive from a bank or a financial institution against your gold jewellery, gold bars, or gold coins. The interest rates are lower than those charged on personal loans, usually short-term loans if the borrowed money is pledged against gold.

Gold loans are easy to secure and convenient because banks and financial institutions provide several repayment methods. When you book a loan against gold in India, you will evaluate your gold jewellery for purity and process your loan for a fee. Ensure that the monthly repayments of the loan amount and the interest instalments are also expected .

What happens to a gold loan if the borrower dies in India?

How does the bank go about recouping the loan?

If you die, your family members will be responsible if you fail to repay the gold loan. However, if you are insured, the remaining loan amount will pay on your behalf by the insurance provider. Every loan nowadays comes with insurance. If you do not have insurance and your family members cannot settle the bill within the agreed-upon time frame. Bank employees would take your gold possessions to auction.

The bank will recoup the loan amount by melting your gold. It’s usually a good idea to obtain insurance that will cover all of your debt payback obligations after you die, easing the burden on your family.

Nobody wants to lose gold because it is the most coveted and desired metal. Initially, the bank requests that the guarantor repay the loan amount because it is solely their obligation. Because gold is such a valuable item, there is no need for a guarantor to have the loan accepted. You will get a loan extension time if you miss any gold loan repayment option.

So If you cannot repay the loan after an extension of the repayment time, the bank will seize your assets by reclaiming the obligation.

What happens if you don’t pay off your debt?

Gold loans are straightforward to obtain, and for convenience, banks and financial institutions provide several repayment options. Unfortunately, unforeseen events may prevent people from repaying their debt on time. It may have ramifications that the borrower is unaware of sometimes but will learn about in this article if a loan is not paid on time.


 At the beginning of the loan’s due date, the corporation must impose a penal interest rate on the loan amount. However, it does not apply to agricultural loans up to a specified amount.

SMS reminders/calls/emails/letters: 

reminding them of the outstanding loan amount and avoiding significant surprises in the event of a persistent late, the company is expected to make recurrent SMS reminders/calls/emails/letters. However, borrowers can adjust their repayment schedule at the branch office where they received the loan.

It’s not just gold; before taking out a loan, the borrower always signs terms and conditions that extend his liabilities to his family. If the borrower passes away, the lender will not hesitate to enforce the loan terms to recover principal, interest, and, if applicable, penal interest. If the borrower dies, the legal successors’ obligations remain after the borrower has failed.

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