Everyone requires financial aid at some point in their lives, and there’s no shame in looking into lending choices. However, there are other borrowing choices available, and you may be having difficulty choosing one.Gold has immense social as well as financial value in India. It is a highly liquid asset that takes prevalence over other investment forms. Therefore, borrowers in India pledge gold to secure funds for a range of monetary needs. Moreover, many financial institutions provide online gold loans, making the process easy and customer friendly.
Although the application process is pretty straightforward, there are certain things that people need to keep in mind while taking a gold loan.Organized institutions such as banks and NBFCs have worked on improving the way the credit sector operates since the formalisation of the lending industry. At the same time, the Indian public is beginning to comprehend the enormous potential that gold loans may provide. As a result, gold loans have become increasingly popular in comparison to personal loans.
Things to consider before taking an online gold loan
Since a gold loan is a secured loan, its interest rates are considerably lower than other loans. However, there are other crucial factors that applicants should keep in mind to get maximum benefits.
Read the following points to know about it in detail-
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Valuation of Gold
The value of gold assets will determine the loan amount a person can get against it. Lenders usually sanction loan against gold ornaments that are 22-karat. Borrowers can get a loan of up to Rs. 2 crore depending upon the quantity and quality of gold items.
Moreover, lenders provide a 75% loan-to-value ratio for gold items, meaning if the items’ valuation is Rs. 1,00,000, it will fetch a loan amounting to Rs. 75,000.
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Methods of Repayment
Non-banking financial companies (NBFCs) in India provide multiple loan repayment options to borrowers. Knowing the following methods will help borrowers decide how they wish to clear the loan.
- Applicants can repay both the loan amount and interest in the form of EMIs, which is an affordable option.
- Borrowers also have the option to pay the interest at the beginning and pay the principal amount later throughout the tenure of loan.
- Lenders also let the borrower pay loan interest monthly, bi-monthly, quarterly, half-yearly or yearly as per their convenience. In this case, borrowers can pay the principal at the end of loan tenure.To repay a gold loan borrower can simply choose the usual EMI option. They can also choose to return the interest during the course of the loan and pay the principal at the conclusion of the mandate. Borrowers may opt to pay the interest and loan amount in one single sum at the conclusion of the term. Gold loans provide solutions to boost your repayment ability, giving you the best chance of paying off your loan
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Eligibility criteria
The lending institutions set certain basic criteria that applicants need to fulfil to avail of a loan against gold without any issue. Although these parameters are not strict, the borrowers need to complete the following to be eligible for a loan-
- Age- 21-70 years
- Nationality- Indian
- Purity of gold- Not less than 22 karat
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Interest rates
Checking the interest rate of the loan provider is a crucial step every borrower should perform before availing of a gold loan. Lenders usually determine this rate based on the risk profile of an applicant.
Other factors, such as tenure, loan amount, gold’s market price, running inflation etc., also influence the interest rates on gold loans. Borrowers should compare the rates of different lenders to get the most economical interest value.
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Loan tenure
The repayment period for a gold loan is up to 12 months, which gives borrowers a lot of flexibility to pay it back at their convenience. However, choosing a shorter tenor will help borrowers save significantly on the overall interest amount.
Applicants should also enquire about the process of loan foreclosure before completion of tenure and any related charges. Individuals should carefully calculate the EMI beforehand and choose the term accordingly since; delayed or missed payments can attract penalty charges.
Apart from the criteria mentioned above, applicants must also consider loan processing fee and any other charges related to the gold loan.
Although the online gold loan application process is simple and hassle-free, borrowers must carefully assess their eligibility before applying. This will ensure timely approval of loan and also streamline the process.Banks are not offered with any security when it comes to personal loans. The loan applicant’s income verification documents are next scrutinised by the lending institutions. As a result, they charge small processing costs for personal loans. Processing costs for personal loans typically vary from 0.5 per cent to 1% of the loan amount. In the case of gold loan, borrowers do not require to show income proof documents when applying for a it because they are using their gold holdings as security. Gold is still among the most popular investment option in most Indians. Furthermore, the steady rise and fall in gold prices provide investors with several opportunities to acquire the gleaming metal. In the long term, gold provides a profitable possibility to obtain a loan. It is reasonable to assume that taking out a loan against gold assets is a better investment than taking out a personal loan.
