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 loan. The gold loan can be availed by anyone who is above 18 years of age and has gold ornaments or coins to pledge as collateral. It 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 creditworthiness. It reflects how well a person has handled its credit and credit repayment. Every form of credit or loan that you take it’s recorded with the concerned bank and financial institutions. The credit bureaus like CIBIL, Experian, etc., at regular intervals, collect the information of borrowers from banks and financial institutions to calculate their credit score and generate credit reports. This means that every credit or loan that you take impacts your credit score, and so does the gold loan.
Let’s dive deeper into the impact of the gold loan on your credit score.
- Payment of Gold Loan: One of the most crucial aspects that will impact your credit score is the timely payment of your loan. If you make timely payment of your loan, it will have a significantly positive impact on your credit score. However, if you fail to meet your loan obligation on time, then the impact on your credit score will be negative.
- Regular Payments: The loan is mostly repaid in EMIs. When you pay your monthly dues on time or before the due date, it reflects that you are handling your credit properly. Regular payments made are reflected in the credit report and makes you a trusted borrower as compared to the individual who does not make regular payments.
- Credit Mix: By availing a gold loan, you add a different variety of credit in your portfolio which could easily balance the scale of unsecured and secured loans. Having some credit mix is important as it reflects that you know a thing or two about managing your credit and you are not just going about availing loans for every second reason.
- Default: A loan default is considered when you fail to repay the borrowed sum to the lender. The default of a loan is a much serious credit crime than making delayed payments. Simply put, you fail to return the money you borrowed from the lender; this hampers your reputation as a borrower and destroys your creditworthiness. Your credit score will take a serious hit as and when the default of loan enters your credit report. On 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 track. Also, refrain from making multiple loan inquiries as it also has an adverse effect on your credit score. Avoid late payment; otherwise, along with a negative impact on credit score, it will also impact your pocket with late fees. Setting 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 me and compare different options.