A gold loan comes to your rescue when you need urgent funds. People can avail of gold loans from several financial institutions and banks. Some idle gold lying in the house can also be used to take gold loans. The lender will take the gold and give a loan against it at a good interest rate. One of the easiest and best loan alternatives available today is the gold loan. This type of loan is a secure option for people who want a diversified portfolio. It is simple to apply for a gold loan. You must determine which lender to choose when applying for a gold loan.
There are several other factors to keep in mind to find the best gold loan. Digitalization has made it extremely easy to stay updated about the gold rate in every city in India. Thus, people who want to know the Gold rate today in Pune must go online and do a quick search. In this article, you will find some of the important factors and methods that will help in selecting the best lender for a gold loan.
Factors that you should keep in mind before taking a Gold Loan
- Lender’s credibility
For a loan on gold, you must submit your gold to the lender as a security or collateral. The gold deposited will be returned to you after the loan is repaid on time. In an emergency, some lenders also give gold on the loan’s part pre-payment. But new investors can doubt the give-and-take method of gold for a loan. There is a possibility that you deposit your gold to a fraudulent lender.
Therefore, you must do a background search about the lender to find out the credibility of the person. You must always choose a reputed private bank, public bank or NFCs (Non-Banking Financial Companies). This ensures that your gold remains safe. Always do thorough research about the lender you are choosing to deposit your gold at. Also, look at the customer reviews provided by the loan company to know about their safety measures and other policies before taking a gold loan.
- Loan Amount
This is an extremely important factor when applying for a loan against gold. Different lenders provide loans but the amount differs from bank to bank. You must keep in mind that no lender gives a loan amount on the full value of the gold. The loan amount ranges between 65-90% of the overall gold deposited. For instance, if the gold value is Rs. 10 lakh but the maximum loan amount you can get is Rs. 9 lakh.
- Interest rate
The rate of interest is the most important factor when deciding the repayment amount. You must always choose the lender which offers the lowest interest rates. Therefore, look for lenders providing low-interest rates along with fulfilling your requirements.
- Repayment methods
The repayment method is one of the major factors that must not be ignored for a gold loan. This type of loan provides a flexible repayment method. You must find out about the repayment method offered by the lender. Some lenders allow you to make interest payments quarterly, monthly, yearly or semi-yearly while making the principal amount paid when the tenure ends.
You can also make EMI repayment to pay both the interest and principal amount every month. Some lenders also allow making Bullet repayment of both interest and principal amount when the tenure ends. Therefore, check the type of repayment method that is most suitable for you.
- Tenure
The gold loan tenure is short and ranges between 12 to 48 months. You must determine your capacity of repaying the amount before applying for a gold loan. You must try not to miss any payment as it will affect your credit score.
You may also have to give some additional charges. Therefore, people must keep the tenure and repayment method offered by the gold loan facility. Gold is the ideal loan option for people facing a temporary cash crunch, business finance needs, or immediate personal needs. Gold loans are not suitable for purchasing properties or any other high-value expenses.
- Non-payment of the loan
You must also determine what will happen if you fail to make repayments on time. In such circumstances, the lenders or financing companies can auction the gold you have deposited. The lender can ask for some additional gold equal to the LTV ratio. This is necessary when the gold prices keep fluctuating in the market.
Gold loans have become one of the best loan options during and after the pandemic. This is a helpful option for people having business and personal needs. There are many different gold loan schemes offered by NBFCs and banks. Availing of a gold loan is also very convenient and is a popular loan option. The gold loan can be used for home renovation, child education, medical emergency, funding businesses etc.
