Gold Loan Default: If you do not repay the gold loan, your gold can be auctioned, what are your legal rights?

Gold Loan Default: Gold loan is considered to be the easiest and safest loan. But, banks can take many strict steps in case of gold loan default. This includes auctioning of gold. Your credit score can also be affected.

Gold Loan Default: Gold loan is one of the easiest and safest loan options in the Indian market. In this, customers can take instant loan by pledging their gold jewellery or coins. However, an important condition is attached to this facility – timely payment. If the borrower does not repay the installments on time or does not settle the loan within the stipulated period, it can have serious financial and legal consequences.

Let us know what happens in case of default on gold loan, what kind of action can banks take and what can be done to avoid default.

What is gold loan default?

When a borrower does not pay the gold loan EMI, interest or principal as per the scheduled schedule, it is called a gold loan default. Even though your gold is with the bank as a pledge, delay in payment affects the customer’s credit profile and financial position.

What happens on loan default?

In case of default on gold loan, first of all the bank adds late fees and penalty interest on the outstanding amount. Over time this amount increases, making it more difficult to repay the loan. Also, this default is reported to the credit bureau. Due to this, the customer’s credit score falls and it may be difficult to get any kind of loan or credit card in future.

When does auction and legal action take place?

If the loan installment is not paid even within 30 to 90 days, then the bank can start the recovery process. In this way the bank can take some special steps:

Gold auction: For loan recovery, the bank can sell the pledged jewelry through public auction.

Loss of ownership: After the auction, the customer loses his right over the gold. If the auction amount is less than the loan amount, the customer may have to pay the remaining amount.

Legal claim: If the value of the pledged gold is very low and the outstanding amount is more, the bank can claim recovery through the court.

What will be the effect of loan default?

The effect of gold loan default can last for a long time. Even if the customer repays the loan later, the mark of delay remains in his credit history. It is usually recorded in your credit history for 7 years. This can cause problems in getting personal loan, home loan or credit card in future. In many cases, banks give loans to such customers at higher interest rates.

What are your legal rights?

In case of gold loan default, the bank can auction your pledged gold, but this process takes place under a fixed legal framework. The bank first sends a notice to the customer and gives him an opportunity to pay. If the loan is still not repaid, then a public auction is conducted.

The customer has the right to take back his gold by paying the dues before the auction. If more money is received from the auction, the extra amount is returned to the customer, but if the amount is less, then the customer is responsible for the remaining payment.

How to avoid gold loan default?

• Take only as much loan as is practical to repay.
• Make a budget ahead of time to pay the EMI.
• Be aware of due dates.
• Opt for gold loan insurance for sudden crises.

What are the ways of solution?

If the financial situation becomes tight after taking a gold loan, then it is best to talk to the bank first. You can contact the bank and request loan restructuring. In this, many banks offer facilities like partial payment or loan tenure. One option can also be that the customer gets the loan transferred to another bank where the terms are favorable.

Actually, gold loan default is not limited to just losing the jewellery. It starts a process that can affect your financial future. Therefore, take decisions with full wisdom before taking a gold loan and contact the lender in time in case of any difficulty in payment. Also, keep some emergency fund, so that such a situation does not arise.

The post Gold Loan Default: If you do not repay the gold loan, your gold can be auctioned, what are your legal rights? first appeared on informalnewz.

News