4 Ways to Settle Your Gold Loan
4 Ways to Settle Your Gold Loan
You can take a gold loan to finance a range of requirements. These can include business expansion, marriage expenses, a medical emergency and so on. You just need to use gold as collateral for the loan. Once you repay the loan, you can get back the gold. Here are 4 ways to settle a gold loan and the results of skipping your repayment.
4 Methods to Repay a Gold Loan
- Pay EMIs Periodically
This is the usual way in which a gold loan, plot loan or simply any loan is repaid. In this method, you need to start paying the EMIs from the month after the month of loan disbursal. It is an appropriate repayment option for salaried applicants who get monthly income. This method helps lower your interest burden as the tenure progresses. Therefore, it becomes easy to close the gold loan on time.
- Make a Prepayment
You can make a lumpsum payment right at the beginning of the loan tenure in the form of a prepayment. This will reduce the amount of the remaining EMIs payable. That way, the EMIs can become more affordable and you may be able to pay them more conveniently. Sometimes, it can help you close the loan early, especially if you pay the whole outstanding amount in one go. Else just use an online gold loan calculator to check the reduced EMI value.
- Make Part Payments
In this method, you can make one or more large part payments to the lending bank during the loan tenure. The ideal time to do that is when you get a salary hike or when your business revenue increases. After making a large part payment, you can either reduce the remaining tenure (keeping the EMI value same) or lower the remaining EMI amount payable (keeping the tenure same). You can figure that out using an online gold loan calculator. Whichever option you choose, it will become easier to repay the outstanding amount.
- Opt for Bullet Repayment
In this method, you will not be foreclosing your loan. Instead, you will be paying the principal amount and the applicable interest on the maturity date. In other words, you need to make a single repayment at the end of the loan tenure.
Consequences of Not Settling a Gold Loan Timely
- Penalty
The lending bank can charge a penalty based on the outstanding amount from the due date of repayment.
- Auction or Sale of the Gold
The bank will send you reminders to clear your dues. If you ignore them all, the lender may not have any option but auction or sell your gold to cover the dues. The lending bank will inform you about the same and any arrangement expenses involved in the procedure.
In case the sales proceeds surpass the outstanding amount, the lender will transfer that to your account within 30 days of the auction. Else if the amount is lower, the lender can recover the outstanding with the help of legal proceedings.
- A Negative Impact on Your Credit Score
If you skip some EMI payments or fail to repay the entire loan by the tenure’s end, the lender will inform the same to the credit bureau. The credit bureau will further inform all the lenders. As a result, you may not get any loan. Even if you get one, the interest rate can be very high. Also, the loan default would bring down your credit score which would have the same result.
Now that you know what happens if you can’t settle a gold loan in time, ensure to repay it over the tenure. Take suitable steps like setting reminders for this cause.
