Indian culture values gold highly. India is a major gold consumer and importer. Gold has monetary and decorative uses in India. They have access to this money whenever they have a pressing financial need. Gold can be used as collateral for a loan in the event of a medical emergency, business development, or other financial obligation. Consider these tips before you apply for gold loan.
The loan depends on the price of gold
Gold loans are offered by a number of banks and NBFCs, albeit the amounts available from each institution vary. When the gold’s purity is higher, you can borrow more money against it. Gold is evaluated by the banks’ and NBFCs’ in-house gold evaluators to ensure its authenticity and quality. This is used to determine the maximum amount that can be approved.
The Loan to Worth (LTV) ratio and individual lender policies determine the percentage of the gold’s value that can be borrowed. This means that if your gold is worth 1 Lakh, you will only be able to borrow between 75,000 and 90,000. Before applying for a gold loan, you should find out the most you may borrow from a particular bank. Gold in any form (coins, jewelry, etc.) must be 18 carats or above in order to be accepted as collateral.
Lenders may assess additional fees beyond the gold loan rate ,including processing fees, paperwork fees, appraiser fees, payment default fees, loan late fees, etc. Overall, these costs might make borrowing more expensive. Because of this, before applying for a gold loan, you should carefully consider the fees that the lender would likely impose.
Is the lender credible?
It can be difficult to find a reliable gold loan provider among the many banks and NBFCs currently offering this service. You should verify the lender’s legitimacy and trustworthiness before you apply for gold loan. Since you are promising valuable jewels, you will need to exercise extreme caution.
You should research the lender’s reputation and the safety procedures they’ve put in place to protect the gold you’ve promised. Gold loans can also be obtained through several jewelers and unlicensed lenders, often at somewhat better rates. However, offers from unlicensed lenders should be avoided. Many customers who have borrowed from unlicensed lenders have been victims of fraud, with the gold they were promised never arriving despite full repayment.
Gold loans include a very adaptable payback schedule. You may be able to make repayments through EMIs, pay the principal and interest at the conclusion of the policy term, or pay the interest monthly and the principal at the end of the policy term, depending on the lending arrangement you pick.
As a result, before committing to a lender, it’s important to figure out what kind of repayment plan will work best for you.
Rate of Interest
The rate of interest plays a significant role in determining the monthly EMIs for a gold loan. A gold loan is a secured loan, so the interest rate is lower than with other types of loans like personal loans that don’t require collateral. Gold loans have an interest rate that can run anywhere from 7% per year to 15% per year, depending on the lender.
Several criteria, including the gold’s purity, determine the interest rate on a gold loan. As a result, it’s important to compare interest rates from different lenders. When compared to NBFCs, banks have a lower interest rate. In contrast to NBFCs, banks often tack on a processing fee of 1% to 2% of the loan principal. To make a well-informed selection, you should weigh the entire cost of borrowing against the benefits of borrowing from different lenders.
When money is needed quickly, a gold loan is one of your best possibilities. Gold is supplied as collateral, and borrowers have the opportunity to pledge the same gold as security numerous times, among other perks. The process is quick and uncomplicated, and borrowers have a range of repayment options and loan amounts to choose from.
Both businessmen and salaried workers can benefit from this option. But before you apply for gold loan, make sure you shop around and pick one with an interest rate that works for you. To avoid disappointment later, it’s important to read and comprehend the benefits, features, and terms and conditions. After you acquire the gold loan, make sure to repay it on time.