Default in a loan occurred when the monthly EMI computed is not duly paid for a certain period. Defaulting a loan not only drastically diminishes the credit score, influencing the ability to receive future credit but also can lead to usurpation of salaries or personal property. To prevent this, one can contact the creditor or loan servicer and ask for the restructuring of the loan period. Generally, the creditors allow a grace period before penalising the debtor when he skips one loan repayment. Delinquency is the period between missing a loan repayment and being a loan defaulter. It provides enough time for the debtor to resist the default of the loan by contacting the creditor. Otherwise, one can choose to get the debts consolidated.
The best choice is to add up all the dues taken from different creditors together and consolidate it in one EMI that the borrower can pay back every month. This is debt consolidation, and it decreases the level of stress of the debtor who gets baffled with the outstanding payments, interest rates, and numerous creditors. Moreover, one single EMI relieves him to pay all the expenses he desires to incur at one shot. But if he runs out of funds, then the gold he has in his home can fetch him a gold loan as it does not need a strong credit score to get approved.
Debt consolidation enables the debtor to settle with a single EMI every month and have a sole loan, where, in fact, he has several loans to pay back. Gold loans like Muthoot Gold Loan are one of the most promising options to wipe all the dues for debt consolidation because of their pocket-friendly interest rate and easy availability. However, if a person has several dues to clear up for the loans he has taken over time and has credit card bills that are unsettled, then the financial stress he goes through is heavy and can also lead him to a debt trap.
If the debtor selects to take any other personal loan over a gold loan, he must be aware of the Gold loan interest rates, which are comparatively lower. Personal loans can be chosen when the debtor does not have collateral to pledge at that point in time. And it may also take time to get approved as personal loans are subject to the borrower’s credit score, and a person with so many loans cannot have a good credit score. If the house’s women apply for the gold loan, the gold loan interest rates reduce to some extent, which can be profitable for the debtor.
The multiple debts can assist a person in fetching debt consolidation loans or personal loans, but it will sum up the burden as the debtor will be bound to pay back the sum of money. If the debtor opts for a gold loan, then if he fails to give back the loan amount, the creditor will forfeit the gold he pledged but nothing else. Therefore, one must make an effort to pay out the maximum amount of loan when they are financially stable as it puts a limited burden at times of hardship. People who opt for NBFCs get the facility of no charges for prepayment of the gold loan.
Gold Loan is more beneficial for the buyer as options to repay the loan are favourable, now and the gold loan can be paid back the next day or within a week with no prepayment charges. One of the best ways to decrease the outstanding loan amount is to repay the principal amount and then pay back the total interest upon the agreed loan amount. This option is convenient as it can save a lot of borrower's wealth on serviceable interest. So a person with multiple debts having gold in his possession must choose to get the gold loan to get rid of all dues as quickly as possible after debt consolidation.
