What happens if I don't renew my gold loan?

If you do not renew your gold loan when the tenure ends and fail to repay the outstanding amount, several important steps follow—each with serious consequences for your gold and your financial standing.

Typically, the lender will start by sending you reminders through calls, messages, or emails as the due date approaches. If you miss the repayment deadline, you may incur additional charges, known as penal interest, which can increase your total dues.

If you still do not respond or settle your loan after repeated reminders, the lender will classify your account as a Non-Performing Asset (NPA). At this stage, the lender is allowed to begin the process of auctioning your pledged gold to recover the unpaid dues. You will be formally notified about the impending auction, usually at least two weeks in advance, giving you a final opportunity to clear your dues and reclaim your jewellery.

Once the gold is auctioned, the proceeds are first used to pay off your outstanding loan amount, interest, and any penalties. If the auction fetches more than what you owe the surplus is returned to you or your legal heirs, generally within 30 days. However, if the auction amount falls short, the lender may pursue further action to recover the remaining balance, which could include legal proceedings.

Defaulting on your gold loan can also negatively impact your credit score which can make it harder to get loans in the future. So it is always best to communicate with your lender and seek solutions if you are unable to renew or repay your gold loan on time.