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5 Factors That Cannot Be Ignored While Applying for A Gold Loan

  • The COVID-19 pandemic created an atmosphere of financial uncertainties and gloom, with many people running out of their savings to meet immediate expenses. Gold loans are ideal for Indians to manage the financial crisis due to easy availability in our households.

    Both banks and non-banking financial companies are offered gold loans and can be availed by salaried and self-employed individuals. It is a secured loan where you pledge your gold ornament, bars, and coins as security to avail of a gold loan. The gold loan interest rate calculator on the lender’s site will help determine the ideal interest rate and flexible payment tenure suited to your requirements.

    The biggest advantage of a gold loan is that it is a multi-purpose loan with no end-use restrictions. It is one of the best options to get instant money and deal with your specific financial requirements.

    Benefits of Online Gold Loan

    • Since borrower pledged their gold as collateral, it makes online gold loans the most secured loan available.
    • Every lender has a gold loan interest rate calculator on their website to help you ascertain an interest rate suited to your needs.
    • The turnaround time for gold loan approval is significantly less post-submission of KYC documents and gold ornaments.
    • Timely payment with flexible repayment options helps boost borrowers’ credit profile.
    • The amount for a loan against gold is measured based on the value of the gold. The loan-to-value (LTV) ratio is considerably higher than other loans.

    Applying for gold finance may sound easy, but there are factors that we tend to forget sometimes that lead to getting an unfavorable loan amount, interest rate, and loan tenure.

    Here are the factors you must not forget if you are someone who is in urgent need of funds and choosing a gold loan to cater to your financial needs.

    Lender Credibility

    You need to submit your gold coin, bar, or jewelry as collateral to the lender to get a loan against gold. The lender is responsible for preserving your gold till you make the entire payment. However, the lender may turn out to be a fraud and end up duping you with your precious possession even after you pay off the whole amount.

    Therefore, check for the credibility and reputation of the lender before applying for a gold loan. Reviews from other consumers are crucial to identifying a legitimate lender. Also, a lender’s legacy and longevity can help you find out the right lender.

    Loan Amount

    Another factor you must not forget is the gold loan amount, which is always measured based on your gold value and your repayment capacity. The gold loan amount typically varies for each lender. It usually ranges from 60% to even 90% sometimes, but no bank or NBFC offers 100% of your gold value as a loan.

    Therefore, carefully check the lender’s policy before you select the highest loan-to-value (LTV) ratio for your gold loan.

    Interest Rate

    A higher interest rate can put immense strain on your finances and monthly budgets. Failing to make timely repayments can adversely affect your credit score. So, while using a gold loan interest rate calculator, you must ensure to get a lower interest rate so that you do not have to pay high repayment amount.

    Repayment Methods

    Lenders often facilitate different gold loan payment methods. However, the borrower must know all the repayment options available before applying for a gold loan. Some lenders even allow for paying the interest upfront and the principal amount towards the end of tenure. In contrast, others demand to make interest rate payments monthly, quarterly, semi-years, and yearly and pay the principal amount at the end of the loan tenure.

    Gold Loan Tenure

    The gold loan tenure generally ranges from 12 to 48 months. Assess your financial liabilities and repayment capacity before opting for gold finance. If you fail to make timely repayments, it can hurt your creditworthiness and ability to secure other credit instruments in the future.

    To Summarize

    A gold loan is an excellent option to get instant money to deal with an emergency, but you must keep the said factors in mind while applying for it.

    Originally Posted on: Webku.in - Muthoot FinCorp


    Harshit Agrawal 10-May-2021 1207 Views

About Author

Harshit Agrawal -
Harshit Agrawal heads digital marketing for Muthoot Pappachan Group from its head quarter based in Kochi, India. He has managed digital marketing & activations for brands such as Maruti Suzuki, Hero MotoCorp, Bharti Airtel, Google, Mankind Pharma...read more

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