Due to the coronavirus outbreak last year, around 12.2 crore Indians lost their jobs. To meet their urgent needs like paying medical bills etc., people were opting for gold loans. Putting gold as collateral is not a new practice. This practice has prevailed among Indians for ages.
Many free websites can be used to check your gold loan eligibility. You can check your eligibility for Shriram Finance Gold Loan.
Let us look at some of the critical points you must consider while applying for a gold loan:
- Gold Purity Determines the Loan Amount
The purity of the gold will determine the amount of the loan that is subsequently approved. This indicates that the higher the gold purity, the higher the loan amount. The fineness of the gold pledged must be 18-24k to qualify for a loan. A loan against jewellery is applicable in the case of gold loans. If the jewellery contains stones, gems, or any other metal, those elements will be subtracted before evaluation. The loan amount you get will only be decided by the quantity and purity of gold in the asset you provided.
- Check the Credibility of the Lender
Because you'll be offering your valuable gold as collateral, you need to make sure the lender is trustworthy. Avoid taking out a loan from a jeweller or a small business since they may be unlicensed and have unfavourable terms and circumstances. There's also the potential that they're frauds. It is preferable to deal with a reputable financial institution.
Have you ever imagined a circumstance where the lender is a fraud, and you don't receive your gold back after completing full repayment? To avoid such cases, you should investigate the lender's reliability before taking out a gold loan.
Remember to pick a reputable public or private bank or Non-Banking Financial Companies (NBFC) as your lender so that your gold is safe. Always do your homework on the lender you're considering. Check things like client evaluations of the lending facility they give, their security precautions for your gold, and other things.
- Choosing between Banks and NBFCs
When it comes to finding a trustworthy lender, you have a couple of alternatives. You can get a bank gold loan or an NBFC gold loan.
When it comes to appraising your gold, NBFCs may be more lenient, and the gold loan procedure is easy and painless. When comparing banks and NBFCs, don't miss to compare the interest rates. Choose the one that offers cheaper interest rates and assures a minimum and simple verification process and transparent costs. Many NBFCs offer online gold loans with easy documentation.
- Repayment Options
This is an important consideration that many individuals overlook when applying for a gold loan. Customers who take out gold loans have more options for repayment than those who take out other types of loans. So, look into the gold loan repayment options offered by your lender. Some lenders allow you to pay the interest upfront and the principal at the end of the term. In contrast, others allow you to pay the interest monthly, quarterly, semi-annually, or annually and pay the complete principal at the end of the term. You can also choose the EMI repayment option, which requires paying a portion of both the principal and interest each month.
Some of the repayment options are explained below:
- Bullet payment:In this case, the loan payback amount is usually computed monthly, but you pay the whole amount, including interest, at the end of your loan period. This is a good choice if your cash flow is modest at first, but you are confident that it will increase near the conclusion of your loan term.
- Upfront Interest:In this case, you can pay the whole interest at the start of the term and the principal at the end of the term.
- Regular EMI:You have the option of repaying the loan with interest every month. This is appropriate for salaried workers who know they will be paid monthly.
- Overdraft Facility: Borrowers are provided with an overdraft capacity against gold in this case. The borrower will only be required to pay interest on the amount borrowed. This is an excellent alternative for both self-employed and salaried persons.
The gold loan usually has a short term, anywhere between 12 - 48 months. As a result, before taking out a gold loan from any lender, make sure you know your repayment ability because every missed payment will influence your credit score. Not only that, you may be subject to additional fees. So bear this in mind while deciding on the length of your gold loan and the mode of repayment.
- Gold Loan Interest Rate
Interest rates have a direct impact on the repayment amount. It is the most critical aspect in determining your payback amount. So, to avoid having a bigger payback amount, always select a lender with the lowest interest rates. Varying lenders charge different interest rates on gold loans, which is why it's critical to find a lender that can provide you with inexpensive interest rates while also meeting your other needs. You can avail of an online gold loan easily.
So, these are some considerations to keep in mind while choosing a loan.
There's no denying that a gold loan may save the day when you're in desperate need of cash. A gold loan is available from several banks and financial organizations, and it may be used by anybody who has some spare gold in their house. You only need to submit it to the lender, and you will be given the loan amount at a reasonable interest rate. This alone qualifies a gold loan as one of the most convenient lending solutions available today. A gold loan also adds a particular credit mix to your profile due to its secured character.
In case of emergencies, people ignore important points like lenders' credibility, interest rate, etc. We hope this guide can help you avoid such mistakes.