Gold has always been that silver lining in the dark clouds. The reason is that gold is not only an investment but also security! Because of their inherent value, they are readily available to avail finance from banks and financial institutions. Gold loans have time and again proved that they are one of the best and easily available secured loans. Many even spell it as the savior of the last resort where nothing works, gold loans save the borrowers from the financial mishap. However, there are certain things that everyone should keep in mind to get the best out of gold loans.
Here are some of the best gold loan tips you will read this year!
Tips for Gold Loan
1. Quality Matters:
Your gold needs to satisfy the minimum purity criteria to be eligible for financing. Most banks and financial institutions provide finance only for 18-22 carat gold or above. Also, if the ornament is studded with some precious gems like diamond, ruby, etc., they won't be counted for gold loan valuation. Therefore, be sure of the quality before applying for a gold loan.
2. Form of Gold:
The form in which you are providing the gold plays an important role because some institutions may be reluctant to provide loans against bullion, coins, etc. Some may set a specified limit for financing against such assets, for instance, a loan against a maximum of 50 grams of gold coin or bullion will be provided.
3. What's the LTV:
LTV is the loan-to-value ratio meaning how much loan will be provided against the asset's value. The principle is, higher the risk, the higher the LTV. The loan amount depends upon the gold loan valuation. Institutions usually provide loans up to 75% of the gold value. Therefore, if your gold's value is Rs. 1,00,000, then you will get a loan of up to Rs. 75,000.
4.Compare before Selecting:
One of the things that lenders should consider is comparing different lenders to select the one offering the best terms. The primary area of consideration should be gold loan interest rates, other costs and charges, LTV ratio, flexible terms, etc. Do thorough research about different lenders as per the market trends and select the one that suits your needs.
5. Watch for Credibility:
As you are going to pledge your gold against the loan with your lender, credibility becomes paramount. Therefore, it becomes important to go with reputed banks and financial institutions. Selecting institutions just because they offer lower gold loan rates and lucrative offers neglecting their credibility in the market may not be a wise decision, especially when your asset is at stake.
While your gold is pledged with the lenders, it is stored in banks or institutions' lockers in most cases. There is always a risk of theft, robbery, or other event leading to the loss of your gold. Therefore, always go for a lender providing an insurance facility for your gold. This ensures that the insurance company reimburses any loss.
7. Renewal Facility:
As gold loans are some of the most easily available loans, one can go for multiple loans against the same gold, one after the other. Most banks offer such renewal facilities where borrowers can re-avail the loan if they still need funds. However, you can renew your loan only after you have repaid the earlier loan and cannot take multiple loans at the same time from multiple financial institutions.
8. Understand Charges:
Loan and financing facilities involve a cost. This includes processing fees, administrative costs, interest costs, foreclosure charges, etc. However, most borrowers are unaware of the charges they are charged with, which increases their borrowing cost. It is always wiser to go with the list of charges that banks and financial institutions may charge from you. You can get a glimpse of the same from the lender's website as well.
9. Repayment Options:
Gone are the times when EMI was the only repayment option that borrowers were provided with. Now lending institutions provide multiple repayment options to provide more flexibility to the borrowers in terms of repayment.
Following are the prominent repayment options that you can select from:
1. Regular EMI Repayment:
This is the regular EMI option where your EMI consists of principal and interest components over the tenure of the loan. A predetermined amount is set considering the loan's interest and tenure, which is due monthly for the borrowers.
2. Only Interest EMI:
As the name suggests, the EMI consists of only the interest element, while the principal amount will become due at once at the time of maturity. Suppose you have a specific sum of money receivable on a future date. In that case, you can go for only interest EMI where you will have to pay only the interest till maturity and thereafter repay the whole of principal due together.
3. Partial Repayment:
Here, the borrower is not bound by any repayment schedule and pays as per his convenience. This is especially beneficial for business persons where cash flows are not certain. If the borrower receives a lump sum payment, then repaying the principal amount is beneficial to reduce the interest costs.
4. Bullet Repayment:
The whole amount due i.e., principal + interest shall be repaid at once at the time of maturity. Other than that, no amount becomes due during the tenure of the loan. The interest keeps on accumulating in the principal amount until maturity. This repayment option is beneficial only in case of a shorter duration. For a longer one, you may end up paying hefty interest as the principal amount remains outstanding for the entire tenure of the loan.
The above tips bring out a clear picture of gold loans to the people. Shriram Finance gold loan, with its unique features, has been instrumental in meeting people's needs and requirements. Life insurance cover on gold loan, EMI and non-EMI option for repayment, renewal facility, and to be fact checked as some blogs state foreclosure charges as 4% on some of Shriram Finance Gold loan benefits. Nowadays, even online gold loan applications can be made with ease. Shriram Finance online gold loan makes the process smooth and convenient for the borrowers. Apply now to fulfill your needs!