What happens if you don’t repay your gold loan on time?

An Indian Resident between the ages of 18 and 75 who is a merchant, trader, farmer, salaried or self-employed individual can apply for a Gold Loan. The majority of banks only accept gold jewelery between 18K and 22K in quality.

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The list of documents required if you wish to apply for a Loan against Gold with HDFC Bank are:

One Passport Size Photograph

PAN (Permanent Account Number) Card (together with any of the below

mentioned documents) or Form 60

Passport (Not expired)

Driving license (Not expired)

Voters’ ID Card

Aadhaar Card issued by UIDAI

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Borrowers who fail to repay the gold loan typically receive numerous reminders from lenders via calls, SMS, emails, and notifications. If they don’t pay the interest on the loan by the deadline, the lender may impose penalties.

After numerous follow-ups over the time period specified by the bank, if the Gold Loan amount is still unpaid, the bank will eventually liquidate or auction the gold jewellery in order to recover its losses.

According to the Bank of Baroda website, “If nothing else works out, the only remaining course of action the lender resorts to is auctioning your gold to recover or offset the losses incurred from the loan. Lenders typically inform you about the auction two weeks prior to the auction date.”

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As per HDFC Bank website, “you can foreclose or prepay your Gold Loan. However, some charges would be applicable. For foreclosure, the charges would be 2% + GST if closed within 6 months of applying for loan against gold. There are nil foreclosure charges if closed after 6 months.”

Many banks approve of foreclose or prepayment of gold loan, however, it is crucial to find out if your lender has any prepayment penalties or fees.

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