Image default


A loan or credit is financial support that lenders give to you with the trust of receiving it on time. The way you responsibly manage your credit obligations is indicated by your credit score. So to answer the question, yes, gold loan or credit, in general, influences your credit score. Handling your credit or gold loan installments carefully will increase your credit score. On the other side, making careless loan payments may impair your credit score and, as a result, your capacity to receive loans in the future. Handle the credit facility wisely if you intend to have it open to you at all times. You must understand the various ways a gold loan can affect your credit score in order to accomplish this.

To help you better appreciate the effect of the gold loan per gram on your CIBIL credit score, we have addressed a few points presented below:

1. Gold Loan Application

Did you understand that applying for a gold loan can affect your credit score? Yes, you read it properly. Even a few points can be deducted from your credit score by merely applying for a gold loan. How? Lenders make a rigorous inquiry whenever you apply for a gold loan. If you’re wondering what ‘Hard inquiry’ is, it is a word used when lenders request your credit report from credit agencies to analyze if your application must be authorized or not. This rigorous inquiry becomes shown on your credit report.

A few hard queries on your credit report are not a problem because you cannot obtain a gold loan without an inquiry. However, multiple queries appearing on your credit report, especially in a short period of time, may show that you are credit-hungry, i.e., you either urgently need a loan or you are taking on more debt than you need, neither of which is a positive indicator.

2. Gold Loan Payments

Once a lender accepts your loan application, you will have to return it as per the decided terms and conditions of the loan. Meeting the loan terms will enhance your credit score and failure to do so will drive the score down dramatically.

Read on to find out how your credit score will be impacted by your gold loan per gram Payments:

Regular payments

Only by making loan payments on time or early can one achieve a high credit score. Borrowers who pay their loan EMIs on time demonstrate responsible credit behavior, which makes them more acceptable as borrowers than those who are erratic with their loan payments.

Lenders favor supplying these borrowers with gold loans. Some even go as far as allowing a little flexibility on the highest gold loan per gram interest rates.

Loan Default

A default is when you fail to meet the gold loan repayment obligation as per the loan contract. Even a day’s delay in making the loan payment gets reported to all credit bureaus in India who further include this information in your credit report, therefore decreasing your credit score drastically.

Additionally, making the needed payment within 30 days attracts late payment costs and maybe a few other minimal charges. But defaulting on a gold loan for continuous 90 days would get you NPA (Non-Performing Asset) designation on your credit report – a title that hinders your chances to receive a loan from other lenders.

Further non-repayment of the loan may also obtain you a legal notice and in the end, selling of the gold products that you had committed to lender in the lieu of a gold loan.


So now you know in what ways a gold loan rate per gram can affect your credit score. Multiple loan queries might harm your credit score and regular payments can enhance it. Defaulting on a gold loan has a number of repercussions, to put it mildly. The specifics of these repercussions varied from one scenario to another.

But on the whole, you can expect severe harm to your credit score along with fewer opportunities to receive credit in the form of a loan or credit card, a legal notice, additional charges in the form of late payment fees, other penalties, and legal costs and maybe auction of your gold articles. If you are a busy person and often miss the due date of your loan payments, create a reminder on your cellphone, computer, and every other feasible gadget which you daily use. Setting a reminder will assist you in paying your bills on time.

Another thing you may do to minimize late payments is ask your lender to immediately debit the amount from your bank account.

What are the rules for gold loans?

Documents that are necessary to seek a gold loan differ from lender to lender. However, the standard list of documents includes Passport Size Photographs, Identity proof (PAN Card, Voter’s ID, Aadhar Card, etc.), and Address proof (Passport, Driver’s License, Electricity Bill, etc.).

Can I foreclose the loan? Are there any foreclosure charges?

Yes, you can always foreclose the loan at any point in time. For gold loans, the majority of lenders do not charge foreclosure fees, however a handful charge between 2-4% of the outstanding principal amount. You can always get in touch with the lender to know the procedure they use to foreclose.

What are the tenures for which I can avail of the loan?

Gold loans are short-term loans that have a flexible tenure ranging from a minimum of 1 month to 5 years or more depending on the lender.

What should you look out for?

Since your gold is used as collateral for gold loans, you should exercise caution while taking out loans and only borrow money that you can comfortably repay. Defaulting on a loan might badly damage your credit score and report including termination of any future loan application.

What happens if I am unable to clear my dues before the due date?

Each lender has a different policy about what happens to default customers. Some lenders charge interest for the time overdue, which is usually more than the rate a consumer pays for the loan.

Further default on loan payments will result in a notification being sent to you, alerting you of the time within which you will have to clear your responsibilities. Non-payment of a loan by the final notice date can potentially lead to lenders auctioning your gold objects to recoup their unpaid loan amount.

Gold loan is one of the best lending alternatives today. Why? Well, primarily because it is easy to acquire. Such loans enable you to acquire financial aid in an instant without much hassle.

This is another reason why the gold loan market has continued to be well-liked by the general public for so long. Besides banks, numerous NBFCs too have started focusing on this market. While there are various benefits to gold loans, applicants should exercise caution when doing so.

Home Page

About Author

Related posts

How To Apply For A Business Loan Online? (Step By Step Guide)


Points to Check Before a Home Loan Balance Transfer


What are the key side effects of Tenofovir?


Leave a Comment