What Happens When You Don’t Pay Back A Gold Loan?

Gold Loan

As we know, the loan amount is the cash offered to the borrower by money lender with or with no collateral security along with interest. If we talk about Gold Loan then this loan comes under the category of secured loans in which you avail loan by pledging your gold ornaments. After the evaluation of your gold, the banks sanction your loan amount. Keep in mind, your loan sum will be based on the current market value of your gold.

A borrower can face these consequences for nonpayment of a Gold Loan

In case you haven’t paid the loan then the first step taken by the banks (NBFCs as well) is giving you notices and reminders. Being a borrower if you have failed to pay your first two instalments then the Gold loan bank will consider it as late payments but if you attempt the same with your third instalment then you will receive a notice or reminder (under SARFAESI Act 2002) from the bank. If your payments remain pending up to 90 days then it will count as NPA (Non-Performing Assets) and if once this option takes place then being a borrower you will see no doors to take future actions. That’s why banks mostly recommend thinking wisely before applying for Gold Loan or any other loan. Availing loan may take few minutes but when it comes to paying monthly EMIs then you may face several obstacles, so it’s important that you take a look at your expenses, income, and other money-related issues and then apply. It’s also compulsory to comprehend the repayment policy, tenure, and the interest rates and then choose the bank.

Legal actions by banks

Despite sending notices and reminders if still, the borrower gives no response; he/she will face legal action from the bank’s side in which the borrower will get the legal notice. Instead of ruining your credit history, CIBIL and reputation either think before availing a loan, make timely payments or at least get in touch with a bank or respond to their notices. If you face any obstacle in paying monthly EMIs then contact the Gold loan bank, they can help you out in expanding your tenure.


Usually, banks or NBFCs put a penalty on the delayed Gold Loan interest rate payments. This mostly happens in unsecured loans because a moneylender does not have any alternative to recover from collateral.

Asset /Collateral (Gold):

This one is the final step by Gold loan banks. If the borrower is not giving a response to the above-given actions then banks choose its last option in which money lender owns the borrower’s gold’s rights. This is common if we’re saying collateral means the condition is clear if the borrower returns the loan sum at a time then pledged gold will get back to its real owner but if not then the bank has the authority to sell that gold for recovery.

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