Gold loan is also referred to as a loan against gold. Any financial institute such as a bank provides gold loan to the borrowers for any urgent financial requirements. The borrower has to pay subsidiaries in the form of gold in return. The loan amount is a certain percentage of the given gold value by the borrower. When the borrower repays the loan amount with interest, then the gold is given back to the borrower by that specific financial institute. If you are in financial urgency and you have an ample amount of gold in your locker, then the loan against gold is the perfect solution for you to meet your requirements.
But sometimes the borrower fail to pay the loan on the exact time for some reasons that lead to some unfavourable consequences. The consequences depend on the lender, and the necessary legal actions also vary from lender to lender.
Here are some lists of consequences you have to face if you are a gold loan defaulters
Degradation of credit score
Credit score contains the borrower’s loan repayment history and bank first check the credit score rating when some borrower wants to apply for a loan from the bank. Depending on the credit score ratings, the bank decides whether they should give the loan or not. So a defaulter of the gold loan has to face the downgrading of his or her credit score. And the bank may reject the application of the defaulter or can charge more interest.
Reminders of loan repayment
If the borrowers miss a single instalment, reminder calls will start from the lender’s side, and it has continued up to the payment of the whole amount of loan with interest. The lenders also get in touch with the defaulter always through all possible registered communications the defaulter has shared with the lenders.
Lenders take legal actions
Borrowers can make single or two slip-ups in the loan payment. Missing the interest payment for more than three months can be an obstacle for the defaulter from further getting any loan.
If the defaulter ignores the repeated warnings given by the lenders, then a legal notice will be provided by the lender to the defaulter at his or her registered address. The notice conveys a warning message to pay the outstanding amount within a strict deadline.
High penal interest
Retributive interest is usually more than the regular interest that a borrower gives for the gold loan. Sometimes, the lender may charge these criminal interests as the defaulters fail to pay the loan on time. The penal interest rate varies from lender to lender. Usually, it is between 1% to 7% per annum.
Accessories get auctioned
Defaulters may lose their gold accessories as all the gold articles of the defaulters will be auctioned by the bank if they are failed to pay the gold loan instalments on time. Lenders decide to auction the gold as their last option if the defaulter does not even pay the loan amount within the last notice period. In such cases, the defaulters can’t do arguments as the lenders are taking the gold articles legally to recover the outstanding amount.
A defaulter should always be aware of these consequences to avoid any harmful or uncomfortable situations. A gold loan can be a saviour in a crucial moment when a borrower is suffering from financial issues or has some urgency. However, it can also be a reason for losing the precious gold articles of the borrowers.