A gold loan is a secured type of loan where the gold owned by the borrower is secured with the money lending institutions (banks/NBFCs) for the liquidity of cash in urgent need of money. Like any other loan in the market, the gold loan also has to be paid either in EMIs (monthly/quarterly/yearly) or bullet repayment mode (the borrower pays the principal amount along with the gold loan interest rate charged at the end of the tenure).
However, due to unpredictable circumstances, it is possible that the borrower is unable to pay the loan at the scheduled time. If a loan is not paid for a long time without informing the lender with suitable conditions for not paying the loan it can lead to repercussions for the borrower which he might be unaware of. Whereas these actions taken on customer varies from lender to lender. Some lenders might charge interest for the time overdue which is usually higher than the rate of interest the borrower pays on the loan. Following are the expected repercussions the borrower might face for not paying the loan on time:-
Penalty charges - company is liable to charge a penalty from the due date of the loan. However, it is not applicable to agriculture loans up to a certain limit.
Reminders - in case of an ongoing overdue, the company is bound to send periodic messages/calls/emails/letters to alert the borrower of the overdue loan amount. In such cases, the borrower can visit the company branch and reschedule the repayment of the loan to avoid further happenings.
Auction - if full repayment is not made within the tenure of the loan, the company has full rights to sell or dispose of the secured gold through a public auction at risk and cost of the borrower. However, the borrower is informed two weeks prior to the auction of his/her gold.
In case of a surplus of the sale, the company shall adjust the amount and give the remaining amount to the borrower within the 30 days of the auction, and if the sale proceeds are less than the amount due date the company has the rights to proceed to the legal actions against the borrower to recover the shortfall.
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