Top Things to Know About a Gold Loan Before Taking One!

0
Gold Loan
Share

Gold is a valuable metal that maintains its worth over time, despite occasional price swings brought on by changes in monetary policy or geopolitical circumstances. There is a reason why we Indians consider gold a sound investment. In India, the majority of people either keep gold jewellery in their homes or in bank lockers. In cases where you are facing a cash shortage or financial emergency, such as facing a shortage in paying funds for your child’s further education or not having enough for unexpected medical costs, etc., a gold loan can help you sail over with its reasonable gold loan interest rate. However, there are many things about a gold loan that most people aren’t aware of. Continue to read to get a better understanding of those things. 

Eligibility for a gold loan: The eligibility requirements for receiving a gold loan differ from bank to bank and institution to institution. The eligibility requirements for a gold loan are the most relaxed when compared to those for other types of loans. One can be a farmer, trader, professional who is salaried or self-employed, or a businessperson between the ages of 18 and 75 (This requirement varies slightly amongst banks; some need borrowers to be 21 years old with no higher age limit.) to be able to apply for a gold loan. 

Gold loan repayment options: You have a variety of flexible repayment choices with gold loans, including Equated Monthly Instalments (EMI), where recurring monthly payments are required to be made. The second one is bullet payments, in which the loan’s interest is subtracted from the principal amount up front. At the end of the loan term, this must be repaid along with the loan amount. The third one is “Interest now, the principle later,” which refers to a loan arrangement where the interest portion, for example, manappuram gold loan interest rate is paid initially as an EMI during the loan term and the principal portion is paid at the conclusion of the term. 

Where should one get the loan from? While small-time jewellers and “pawn shops,” which are widespread in India, offer gold loans, it is safer to obtain one through a reputable bank or Non-Banking Financial Company (NBFC), which is governed by the Government of India. By doing this, you can be confident that your gold is secure and protected. There are NBFCs that focus on gold loans and provide better manappuram gold loan interest rate as well as other benefits to the borrower. Before choosing where to get a gold loan, it is best to compare the benefits and gold loan interest rates offered by various banks and NBFCs.

Background check on lenders: Banks, NBFCs, and even gold jewellers offer gold loans nowadays. Banks are reliable sources, but for the other two types of lenders, a thorough check into their reliability is necessary. Even though jewellers provide even lower interest rates than banks do, you must have complete faith in them before applying for a loan. The likelihood of fraud is greater with jewellers and less well-known NBFCs.

What kind of gold can be offered as a pledge? The higher the gold’s purity, the higher the valuation, and thus, the bigger the loan amount you will receive from the lender. Lenders require gold to be at least 18 karats pure to be able to receive loan against them. Additionally, the value of any jewels or precious stones placed into the jewellery you are pledging will not be taken into account when determining the loan amount. For the gold loan, just the gold’s worth will be taken into account before telling you the manappuram gold loan interest rate. Rather than gold bars, you are more likely to get your gold loan application approved on gold coins. One thing to remember here is that coins can weigh up to 50 grammes and should have a purity of at least 99.99 percent.

How much will I get for my gold? Depending on the lender, you may be able to borrow up to 90% of the gold’s worth, but this varies by lender. No lender will grant a loan for the full value of the gold. The manappuram gold loan interest rate and the EMI amount that you need to pay to depend on the amount you availed against your jewellery. 

Interest Rate: The gold loan interest rate might range from 7 to 25 percent per year because it is determined by the lender’s risk assessment. The interest rate on gold loans is determined by the LTV ratio, loan tenure, loan amount, and other factors.

Tenure: Gold loans are short-term loans with flexible repayment options and periods ranging from seven days to three years. When choosing the gold loan tenure, one must make sure that they have done a revaluation of their income whether they can repay the loan in that time frame or not. 

Processing charges, foreclosure penalties, and prepayment fees: Processing costs might range from 0% to 2% of the loan’s principal. When taking out a gold loan, the borrower should be aware of this and should specifically ask the lender if there are any processing fees. For gold loans, the majority of lenders do not impose foreclosure or prepayment fees. However, certain lenders may impose a penalty equal to up to 2% of the outstanding sum. Prior to applying for a loan, prospective borrowers should be aware of these fees.

The time between loan approval and disbursement: Once they have validated the borrower’s history and the quality of the gold, most lenders quickly disburse gold loans and credit the amount to your account. Gold loan application is quite fast in comparison to other secured loan processes. As a result, borrowers should ensure that the lender does not take an excessively long time to finish the process.

Customer service: Prospective borrowers should confirm that the lender provides an effective customer care protocol. This will help when paying debts in real time and without fuss. In order to avoid fees, borrowers should make sure the lender sends timely text messages, WhatsApp reminders, and emails on principal and interest payments.

Conclusion

At first, getting a gold loan may appear quite straightforward and simple. Gold loans have the following advantages: involves very minimal paperwork, and compared to personal loans and other similar unsecured loans, gold loan interest rate are significantly cheaper. Moreover, when asking for a gold loan, you don’t have to be concerned about your credit history, employment history, age, etc. You may believe that all you need to do is visit a financial institution, pledge your gold, and receive a sizable sum of money in exchange. But did you know that before you apply for a gold loan, there are several things you need to be aware of? Aforesaid questions and facts will help you not only get the most out of your gold jewellery but also ensure that it is protected.