If an individual fails to repay the loan on time, the lender typically initiates a grace period for repaying the loan. If the loan remains outstanding beyond this period, the lender may charge additional penalties or interest. In rare prolonged non-payment cases, the lender can auction the gold pledged to recover the outstanding balance. It is essential to communicate with the lender and discuss options, such as loan restructuring or extension, to avoid default or potential loss of the pledged gold.