What Happens If You Don’t Repay Your Gold Loan
A gold loan is a secured borrowing option where individuals pledge their gold ornaments or coins to access quick funds. While it offers lower interest rates and minimal documentation compared to unsecured loans, failure to repay can lead to serious consequences.
From penalty charges and credit score damage to the risk of losing your gold through auction, it's crucial to understand what’s at stake before missing repayments.
Consequences of Missing Gold Loan Payments
- Reminder Alerts Expect calls, emails, and messages from the lender as the due date approaches.
- Penal Interest Charges Additional interest (typically 1%–7% p.a.) is levied on overdue amounts.
- Credit Score Damage Defaults are reported to credit bureaus, lowering your score and future loan eligibility.
- Gold Auction Lender may auction your pledged gold after giving at least 2 weeks’ notice.
- Legal Action If auction proceeds don’t cover dues, lenders may initiate legal recovery steps.
FAQs on What Happens If You Don’t Repay Your Gold Loan
- What happens if I don’t repay my gold loan on time?
You may be charged penal interest, receive reminders, and risk your gold being auctioned if the dues remain unpaid.
- Can the lender auction my gold without notice?
No. Lenders must notify you at least 14 days before initiating an auction of pledged gold.
- Can I restructure my gold loan if I’m unable to pay?
Some lenders allow restructuring or tenure extension. You must proactively contact them to explore options.
- Will I get a refund if my gold sells for more than the loan amount?
Yes. Surplus from the auction is usually refunded after adjusting dues and charges.
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