Impact of Gold Loan on Credit Score

Gold loan is a type of credit availing facility in which a borrower pledges his/her gold ornaments with the bank or gold loan company in exchange of receiving a certain sum as loanThe gold loan can be availed by anyone who is above 18 years of agehas gold ornaments or coins to pledge as collateralIt is a secured loan for which you do not need any income proof. 

A credit score is a three-figure numerical expression of an individual’s creditworthinessIt reflects how well a person has handled its creditcredit repaymentEvery form of credit or loan that you take it’s recorded with the concerned bankfinancial institutionsThe credit bureaus like CIBIL, Experian, etc., at regular intervals, collect the information of borrowers from banksfinancial institutions to calculate their credit scoregenerate credit reportsThis means that every credit or loan that you take impacts your credit score,so does the gold loan. 

Let’s dive deeper into the impact of the gold loan on your credit score. 

1. Payment of Gold Loan: One of the most crucial aspects that will impact your credit score is the timely payment of your loanIf you make timely payment of your loan, it will have a significantly positive impact on your credit scoreHowever, if you fail to meet your loan obligation on time, then the impact on your credit score will be negative. 
2. Regular Payments: The loan is mostly repaid in EMIsWhen you pay your monthly dues on time or before the due date, it reflects that you are handling your credit properlyRegular payments made are reflected in the credit reportmakes you a trusted borrower as compared to the individual who does not make regular payments.
3. Credit Mix: By availing a gold loan, you add a different variety of credit in your portfolio which could easily balance the scale of unsecuredsecured loansHaving some credit mix is important as it reflects that you know a thing or two about managing your credityou are not just going about availing loans for every second reason. 
4. Default: A loan default is considered when you fail to repay the borrowed sum to the lenderThe default of a loan is a much serious credit crime than making delayed paymentsSimply put, you fail to return the money you borrowed from the lender; this hampers your reputation as a borrowerdestroys your creditworthinessYour credit score will take a serious hit aswhen the default of loan enters your credit reportOn top of it, the default entry stays for 7 years, which means you are going to face some serious troubles in the future whenever you opt for new credit or loan. 

Keep the points mentioned above in mind to make sure that you are always on the right trackAlso, refrain from making multiple loan inquiries as it also has an adverse effect on your credit scoreAvoid late payment; otherwise, along with a negative impact on credit score, it will also impact your pocket with late feesSetting reminders or automatic payments are effective methods to make sure that you make your credit payments on time, in case you have a tendency to forget the due date.  Check out for a gold loan near mecompare different options.