Forced To Prepay The Gold Loan? Here's What You Can Do

If the value of the pledged gold has fallen, you will have to prepay the loan. Know 2 things to do when you are forced to prepay the gold loan!

27 Oct,2022 18:59 IST 83 Views
Forced To Prepay The Gold Loan? Here's What You Can Do

Indians have a special place for gold, primarily used during religious and auspicious occasions. However, gold owners who need capital to cover various personal expenses utilise gold ornaments to acquire funds through gold loans. Once taken, the lenders charge interest, which the borrowers must repay along with the principal amount within the loan tenure.

However, lenders may force you to prepay the total outstanding loan amount even if you have not defaulted in paying the past EMIs. This article will take you through the steps on loan prepayment, how to pay the loan prepayment penalty and other prepayment charges.

What To Do When You’re Forced To Prepay The Gold Loan?

Most borrowers believe that lenders are wrong when they ask for loan prepayment before the completion of the loan tenure. However, they are within their rights to ask the borrower to prepay the gold loan. The one reason for such a demand is a drop in collateral value, i.e., the gold asset. If the value of the pledged gold has fallen sharply, you will have to prepay the loan and incur a loan prepayment penalty and prepayment charges.

However, in such a situation, the lender may offer two options to the borrower.

1. Part-Repayment

Lenders offer the loan amount to the borrower based on a predetermined Loan-To-Value ratio. This percentage is based on the total value of the gold ornaments in the domestic market. Since the value of the gold in the market has fallen, the lender may offer the option to make a part prepayment of the outstanding amount to equalise the LTV ratio as it was at the time of availing the gold loan. Lenders are known to waive foreclosure penalties and charges if the borrower utilises this option.
Get Gold Loan at the comfort of your home
Apply Now

2. Pledged Collateral

If you do not want to prepay the loan, you can opt to increase the pledged collateral. In such a case, you will have to provide more gold ornaments to the lender to equalise the LTV ratio as it was at the time of availing the gold loan. This way, you avoid paying cash to the lender if you have more gold ornaments, and you can make timely repayments to take back the gold.

Avail of an Ideal Gold Loan From IIFL Finance

With IIFL Gold loan, you get industry-best benefits through our ideal loan management system and a process designed to offer instant funds based on the value of your gold. IIFL Finance Gold Loans come with the lowest fee and charges, making it the most affordable loan scheme available. With a transparent fee structure, there are no hidden costs you have to incur after applying for the loan with IIFL Finance.


Q.1: What are the interest rates on IIFL Finance Gold Loans?
Ans: The interest rates on IIFL Finance gold loans are according to the market.

Q.2: What is the gold loan eligibility?
Ans: The primary eligibility criteria are as below.
• You must be a salaried employee/businessman/businesswoman/trader/farmer or self-employed professional.
• You should be between the age of 21-70 years.

Get Gold Loan at the comfort of your home
Apply Now

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

Most Read

Franking and Stamping: What’s the difference?
14 Aug,2017 03:45 IST
Like 2907 2907 Likes
Personal Loan With Low CIBIL Score
21 Jun,2022 09:38 IST
Like 575 575 Likes
Difference Between 24 Karat and 22 Karat Gold
8 Dec,2022 09:26 IST
Like 165 165 Likes
What is equitable mortgage home loan?
8 Mar,2019 05:15 IST
Like 3204 3204 Likes

Get Gold Loan