Due to the upsurge of gold loans among people, has increased the risk of default gold loans. A gold loan is a form of emergency funds provided by a number of lenders. But we could say the risk is minimal because of the low interest rates charges and the loan amount is lower. In this blog, we will shed some light: what if you don't pay a gold loan?

What Happened If You Don't Repay Your Gold Loan Installments?

Well, there are a lot of things to be prepared for after defaulting the gold loans are mentioned in the following.

  1. The lenders will send you reminders for gold loan repayments. In this case if you default, the lender tries to send a notification or call you for payments. You will be informed from time to time for the non-payment installments on emails, and even with letters.
  2. The lender has the right to charge the penal interest rate for defaulting on the gold loan installments. The extra charge will be applicable for a month only in which the non-repayment occurs. The penal interest is usually from 1% to 7%.
  3. If you don't repay the amount, your credit score might get affected. The credit history will be recorded by the borrower to provide a loan in the future by checking the credit score. A low credit score means a lower chance of getting a loan.
  4. The lender will take legal action against the defaulter by auctioning their gold. If their shortfall occurs, the lender has the right to cover their money through the gold.

How to prevent yourself from Loan Repayment Default?

This is an extremely crucial step for preventing yourself from defaulting. We suggest you plan your all repayments before applying for the gold loan.

  1. Always communicate with the lender effectively to have clarity regarding all the terms and conditions. You can also request an extension for the loan tenure to the lender.
  2. You can also approach the lender for restructuring the gold loan according to your budget. You can adjust loan amount and tenure according to your finances.
  3. Choose the right repayment options for a gold loan by picking up the relevant options. The principal amount may vary if you adjust tenure time. Additionally, many services provide bullet payments where you can pay the entire principal amount upon maturity.
  4. Partial repayment you can consider as another option. On the other hand, EMI are popular for salaried employees.

Why Responsible Borrowing Matters?

It's crucial to remember that gold loans are not “free money.” They are financial tools meant to solve urgent needs—when used wisely, they offer flexibility and security. However, when mismanaged, they can lead to emotional distress, loss of gold assets, and long-term credit damage.

That's why financial planning is the foundation of borrowing responsibly. Always ask yourself:

  • Do I need this loan?
  • Can I repay it on time?
  • Have I considered other sources of funds?

Final Thoughts

Defaulting on a gold loan is serious, but it can be avoided with the right mindset and discipline. Whether you're borrowing for education, medical emergencies, or business expansion, treat the loan as a commitment—not just an option.

At Manipal Fintech, we believe in empowering our customers through transparent, secure, and quick loan services. Our gold loans are designed to give you the highest per-gram value, lowest interest rates, and the confidence that your gold is safe.

If you're planning to apply for a gold loan, or are facing difficulty repaying one—reach out to our expert advisors. We're here to help you build a bridge to a better future.