7 Things You Should Know Before To Take Gold Loan

7 Things You Should Know Before To Take Gold Loan

When a cash crunch hits, you are left with two choices to manage your finances. You can either use your lifelong savings or take a loan. Sometimes, your savings are not enough to meet unexpected expenses, such as cover the cost of a wedding, education, travel, or medical emergency. In such cases, it would be wise to take a loan against your gold reserves.

A gold loan is a secured loan provided by financial institutions in India. You will need to pledge your gold items with considerable value as collateral to secure your preferred loan amount. Compared to other secured loans, you can avail of a lower interest rate, allowing you to make repayments without any delays or defaults.

Before taking a gold loan, you must know the underlying factors to make an informed decision:

  • Interest rate

The gold loan rate is one of the crucial factors of your gold finance. The gold loan interest rates are lower than personal loans. Both banks and non-banking financial companies offer different interest rates. Therefore, it is imperative to compare multiple lenders’ gold loan rates before applying for a loan. You can also use a gold loan interest calculator to determine your interest rate eligibility.

  • Loan amount

In the case of a gold loan, you can secure up to 60% to 75% of your gold jewellery’s value as a loan, which is decided based on your old purity, the current rate of gold, and your lender’s policy. Before applying for a loan, make sure to assess your budget and apply for a loan amount that you need.

  • Lender’s credibility

The credibility of your lender also affects your gold loan. It is crucial to find a reputed lender before submitting your gold items. Check your lender’s credibility and authenticity and ensure that you agree to their terms and conditions.

  • Loan tenure

The gold loan tenure ranges between 6 months to 36 months, depending on the type of loan you are opting for. Choose a repayment tenure within which you can repay the loan amount without putting any burden on your finances.

  • Repayment options

Consider your repayment options while applying for a gold loan. There are a few options that you can opt for, such as EMI, bullet payment, upfront interest, and overdraft facility. In EMI, you pay a percentage of your loan amount and interest rate every month. A bullet payment allows you to pay the entire sum with the interest at the time of maturity.

In upfront interest, you can pay the entire interest at the beginning of your loan tenure and the principal amount at the end. Whereas, overdraft facility enables you to pay interest only on the utilized amount.

  • Gold insurance

Your pledged gold is subject to theft or robbery. Before taking a gold loan, your lender may advise you to buy an insurance plan for your gold. In the case of an unfortunate event, you get compensation equivalent to your gold value.

  • Hidden costs

Besides the gold loan rate, your lender may also charge a nominal processing fee of 1% of the approved loan amount. You must check with your lender about their terms and conditions and ensure to agree with them before submitting your loan application.

So, if you want to apply for a gold loan to meet your immediate financial requirements, consider the above-said things to get the best deal. Also, you can use a gold loan interest calculator to determine your interest affordability before taking a loan.

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