How can a Gold Loan affect one’s CIBIL score?

Gold loan is a financial help provided by various institutions, maybe banks or NBFC, in exchange for collateral which must be gold assets. On the other hand, the credit score is a reflection of the past credit payments, seeing which one can guess your financial situation. The credit score is checked by the lenders before getting an unsecured loan, like a personal loan. Gold loan are not dependent on one’s credit score, which means that if a person is having a low credit score and has gold in their account then he/she is considered eligible for a gold loan. However, a gold loan can affect or influence the credit score. If there is any negligence while repayment of the credit then the credit score will get affected negatively, whereas if an individual maintains the payment schedule and submits the repayment within the due date then the credit score will grow. This aspect of credit score should be maintained as it is necessary for the long run.

Further, we will discuss some of the aspects that can influence or affect one’s credit score:

• Gold Loan Application- Applying for a gold loan can affect the credit score in a negative way, which means that the credit score will go down by a few points every time a gold loan application is submitted. On every submission of gold loan application, a hard inquiry is set like in SBI gold loan, where the lenders go through the credit reports maintained by the credit bureaus and decide whether a loan can be granted to that individual or not. A few hard inquiries many not affect your score to that extent, but if that keeps on repeating, that too in a short period of time then you might be acclaimed as credit hungry, which means that either you are in constant need of credit or take up loans more than your requirement.

• Payment of Gold loans- After your gold loan application is approved you are most probable to get the credit within a maximum time period of 24 hours. Once you have availed of the credit your repayment tenure starts shortly where you have to make sure you do not miss any of the monthly repayments and also submit the ransom before the due date. Failing these criteria will not only put your gold at risk but will also decrease your credit score.

Further, we will look in more details regarding payment of the credit acquired and it’s influence on CIBIL score:

• Regular payments- It is essential to keep the repayments between the allotted time, so as to build a good credit score. Moreover, priorities are given to such borrowers who have a record in clearing debts within time and some lenders even go to the extent of allowing them a little less interest rate than others.

• Loan default- There occurs a default when you fail to meet up to the gold loan repayment within the allotted time period as set by the loan contract. Submitting the loan after a day of delay can also make a difference that can negatively impact your score, as it reduces it. Other than this a late submission of a loan can also invite late payment fees and other nominal charges which add to the payment amount. Further, a default on a gold loan for a consecutive period of 90 days will get you NPA or Non-Performing Asset which reduces the chance of getting loans further. Moreover, constant failure regarding repayments can lead to a high risk on the gold assets, as the lenders might want to sell it and acquire the credit money from it.

Now that you have the information regarding gold loans and their influence on CIBIL score, you must be more careful while dealing with the gold loan and gold assets. Further to prevent the mistake of forgetting due dates, one can set reminders or simply note it in their diary, because late repayment comes with issues like a negative credit score.