Don’t get caught in this trap?

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Every day, advertisements for the auction of gold appear in newspapers. Due to the inability to repay loans, every year, thousands of people lose their gold holdings. The process of taking a gold loan is quite easy. Companies like Muthoot and Manappuram are providing the facility of a gold loan even at home. The process of a gold loan does not require as much paperwork as an education or personal loan. The loan is sanctioned in just a few hours. Another feature is that there are no restrictions on the use of the amount obtained through a gold loan. Due to the security of the loan, banks easily grant it. Therefore, the demand for this loan is rapidly increasing in the market.

The organised market for gold loans in India is approximately Rs 6 lakh crore.

Banks hold an 80 percent share, while 20 percent belongs to non-banking financial companies, i.e., NBFCs. In recent years, major banks have rapidly expanded their presence in the gold loan segment, taking advantage of the opportunities. In this regard, NBFCs are also seen making strides alongside banks. This is contributing to the rapid growth of the gold loan market in the country.

RBI figures indicate that the outstanding amount for gold loans increased to Rs 95,746 crore  in July 2023, showing a growth rate of 23.1 percent compared to July 2022.

Banking expert Amit Kumar Tanwar suggests that most people in the country do not have the habit of assessing their credit. Before taking any loan, one should assess the assets and liabilities, meaning their debt, and should avoid taking another loan to repay an existing one.

Many times, people take gold loan to repay previous loans. When they are unable to pay this loan on time, they lose their gold. Still they remain in debt.

Tanwar states that many times, even after the auction of gold loans, the outstanding amount remains, and banks or finance companies continue to charge interest on it.

This way, despite the gold being auctioned several times, one may not get relief from the debt. To avoid such situations, it is better to sell the gold instead of taking a loan against it.

If your liabilities have increased compared to your assets, refrain from taking a new loan.

In such situations, try reducing the burden of debt by selling assets.

If you are unable to pay the EMI of a gold loan, visit the gold loan company and inquire about rescheduling the loan.

If the value of the gold is higher compared to the loan, you can extend the loan tenure.

If the current company is not helping in this matter, you can consider transferring the balance to another company.

If finding a solution to repay the loan is proving difficult, try borrowing money from friends or relatives for a few days to redeem the gold. Sell the gold and repay the debt. If you succeed in this effort, you can avoid significant losses. Never take a loan to repay an existing one.

If you find yourself in debt trap, make an effort to repay it by selling some assets. In such cases, a little negligence can have severe consequences.