Medical emergencies can catch anyone off-guard and leave you tensed to arrange funds quickly. The costs of hospitalisation, medicines, tests and procedures can easily run into lakhs of rupees. While health insurance can cover some costs, there are usually limits and exclusions. Many people end up dipping into their savings or taking loans to bridge the gap. However, traditional loans require extensive paperwork and collateral and take time to approve. This is where a gold loan for medical expenses can be a lifesaver.
A gold loan for medical expenses allows you to leverage your idle gold jewellery as collateral and get quick funds in just a few hours. As gold prices have surged over the years, financial institutions now offer attractive loan-to-value ratios of up to 75%. This means you can get substantial loan amounts compared to the weight of gold pledged. Let us look at some useful tips for using gold loans to meet emergency medical expenses in a planned manner:
1. Assess Your Fund Requirements
The first step is assessing loan amount for emergencies to get an estimate of the treatment costs from your hospital. This will include hospital room rent, surgeon fees, OT charges, medicines, diagnostic tests, etc. Also, some buffers should be factored in for unexpected expenses. This will give you a clear idea of the loan amount you need to borrow. Apply for a gold loan that covers at least 80-90% of your estimated requirement.
2. Choose The Right Loan Provider
Look for leading financial institutions that offer quick gold loan disbursal, high LTV ratios and flexible repayment options. Compare interest rates, processing fees, and charges from various providers before making a final decision.
3. Pledge Your Gold Cautiously
Pledge gold jewellery that has the least emotional value to you or that you wouldn't need to wear on a daily basis. Avoid pledging family heirlooms, your wedding chain or pieces that have high making charges. Pledge only what is required to raise the loan amount you need so that you can get the rest of your gold back quickly.
4. Opt For A Short Tenure
Gold loans can be availed for a few months to a few years. However, for medical emergencies, it is best to opt for the shortest tenure you are comfortable with repaying. This will help minimise interest costs. Opt for a 3-6 month loan if you have funds to repay it quickly. Go for a 1-year tenure only if your repayment ability is limited.
5. Pay Interest Upfront
One smart way to reduce interest costs on your gold loan is to pay interest upfront for the full tenure you opt for. For instance, if you take a 6-month loan, pay 6 months' interest in advance when you take the loan. This will ensure you only need to repay the principal when the loan matures.
6. Monitor Gold Prices
Keep an eye on gold prices during your loan tenure, especially if you have availed a high LTV ratio. If prices fall considerably, you may need to provide additional collateral to maintain the mandated LTV ratio and avoid lenders auctioning your pledged gold.
7. Start Planning Repayment
Use funds wisely so that treatment is not hampered due to lack of money. Once the emergency is under control, start planning repayment for medical expenses. Explore if you have savings to dip into, assets to sell or other income sources to leverage. Keep lenders updated on expected repayment so they can recover their money on time.
8. Extend Tenure If Required
If you expected to repay from a certain source but funds fall short, communicate with your loan provider immediately. Many financial institutions allow extending the loan tenure in such situations to provide more time for repayment without needing to auction your gold. An extension will cost more interest but will safeguard your gold.
9. Avail Top-Up To Pay Off Loan
If you need more funds to pay off your outstanding gold loan, leading financial institutions offer the facility of a top-up loan. You can pledge additional gold and raise a top-up to repay your existing loan. This will allow you to retain your pledged ornaments.
Monitoring Gold Loan Repayments
Here are some tips for using gold loans to stay on top of your repayment:
- Set Reminders: Mark the loan maturity date on your calendar and set reminders at 15-30-day intervals to plan repayment on time. Keep important documents handy.
- Pay Through NACH: Opt for the National Automated Clearing House (NACH) facility so monthly instalments get deducted automatically from your linked bank account. This takes care of repayment even if you are busy or travelling.
- Pay Online: Most lenders today offer online portals and mobile apps to pay bills conveniently from anywhere using netbanking, UPI, etc. Use these to make payments on time.
- Auto-debit Savings Account: You can instruct your bank to automatically transfer a fixed amount every month from your savings to your loan account so that funds accumulate for repayment.
- Cut Down Spending: Reduce non-essential spending and restaurant bills for some months and divert these savings to loan repayment. Even small cuts go a long way.
- Pay From Bonus/Incentive: If you have a performance bonus, incentive or seasonal windfall expected around loan maturity, inform your HR to partly allocate it towards loan repayment.
- Extend Tenure: If unable to repay, speak to your lender immediately and consider extending loan tenure. This will give you more time to organise funds without defaulting.
- Part-Payment: Make part pre-payments whenever you have surplus funds to reduce interest costs. This will also build lender confidence in your repayment discipline.
Conclusion
Following these tips for using gold loans and aligning finances prudently will ensure you are well-prepared to repay your gold loan for medical expenses on time. Borrow wisely and make regular payments a priority to avoid endangering your pledged gold.
