Gold Loan: When the emergency requires immediate money, the gold loan is considered an easy and early option. You can take a loan by pledging your gold jewelery or coins. But many times people are unable to repay their EMI or interest on time after taking a loan. So you may have to suffer double loss. This not only leads your gold jewelery but also affects your credit score.
What is a gold loan default?
If a person is unable to pay the installment, interest or principal of his gold loan within a stipulated time, then the bank or financial institution can declare him a defaulter. Even though Sona is mortgaged to the bank, the payment in payment can cause economic and legal problems.
What will happen when defaulted?
Increase in penalty and interest
Penalty is added to the outstanding amount for not paying on time. Along with this, compound interest also increases, which can exceed the amount of total payment.
Bad effect on credit score
Default information is sent to the Credit Bureau, so that your CIBIL score can go down. Later, there may be difficulty in taking a new loan or credit card.
What can be legal effect?
If the payment is delayed by 30 to 90 days, the bank can start a recovery process. You will be sent a legal notice, in which the auction will be given. If not repaying the loan for a fixed time, the bank can auction your gold. That is, you will have no right over your gold. In some cases, the bank may also file a court case.
Will it be difficult to get a loan in future?
Absolutely. Default on the gold loan can cause stains on your credit history forever. Later, the chances of getting loans like personal loan, home loan or auto loan are reduced.
How to avoid default?
Follow the option of re-structuring
If your financial condition is bad, appeal to the bank for a restructuring in loan terms. You can choose the option to pay in a long time by reducing EMI.
Make partial payment
If it is not possible to repay the entire loan simultaneously, one can avoid recovery by making partial payment.
Get loan transfer
If you get better interest rate and easy conditions from another bank, select the option to transfer there.
What precautions should be taken before taking a gold loan?
Assess your income and expenses correctly. Take only as much loan as you can pay on time. Never miss EMI date, set alarm or auto-debit. If the amount is large, taking insurance on gold loan can be beneficial. Gold loan is a good option but only when you can repay it on time. If there is a lapse, along with washing hands with gold jewelery, your financial image can also be spoiled.