How Beneficial Is Gold Loan On CIBIL Score & Credit Report?

Gold loan is an secured loan against your gold jewellery or gold product. Does gold loan benefit your CIBIL score and Credit report? Read to Know More.

18 Oct,2022 13:14 IST 133
How Beneficial Is Gold Loan On CIBIL Score & Credit Report?

Not only does gold have a stunning appearance, but it also offers financial security. Several financial institutions offer Gold Loans to help you satisfy a shortage of funds. However, before applying, it is crucial to understand how a Gold Loan might impact your CIBIL score.

Credit scores reflect how well you repay the loans you take and how responsible you are with your credit payments. Making regular payments improves your credit score, whereas being negligent about repayment lowers your score. Here’s how acquiring a gold loan affects your credit score.

The Effect Of Gold Loan Payments On Your Credit Score

Once the lender accepts your loan application, you must repay the amount according to the terms and conditions. When you meet your loan obligations, you will boost your credit score; when you fail to do so, you will see your score fall significantly.

Here is how your gold loan payments may affect your credit score:

1. Regular Payments

To build a good credit score, you must pay your loan EMIs on time or before the due date. Borrowers who pay their EMIs on time show that they are responsible with credit, making them more attractive to lenders than someone who fails to pay their EMIs irregularly. Lenders also prefer to give loans to such borrowers. A few lenders are even willing to relax the interest rates on gold loans.

2. Loan Default

Failure to repay a gold loan per the contract is termed a default. Credit bureaus in India report even a day's delay in making the loan payment, which is added to your credit report and reduces your credit score.

Payments made after 30 days are subject to late fees and other nominal fees. Failure to repay a gold loan within 90 days will result in a Non-Performing Asset (NPA) label on your credit report, making it difficult to get a loan from another lender. You may also be subject to legal notice if you fail to repay the loan, and the lender will sell the gold items you've pledged as security.

Considering the above factors, you must ensure that your credit report is immaculate by repaying your gold loans on time. Moreover, multiple loan inquiries can lower your credit score; avoid applying for multiple loans at once.

Frequently Asked Questions

Q1. What happens to your CIBIL credit score if you do not repay the gold loan?
Ans. You will see a drop in your CIBIL score if you fail to repay the gold loan since the lender will report non-payment or missed payments to the credit bureau.

Q2. Where is a hard inquiry reported?
Ans. You can see every hard inquiry on your credit report, and each one reduces your credit score.

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.

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