Loans have come to the rescue of those facing financial hardship for years now, there are numerous loans that you can pick based on the need. Gold accumulation is one of the most preferred when it comes to wealth selection. One form of loan that is rapidly becoming the preferred option is a gold loan. Many of its success comes from the fact that it has a lower interest rate relative to a personal loan. You can get a gold loan from a bank and a non-banking financial company (NBFC) within minutes and without any hassle.
You can apply for a gold loan if you are a businessman, a salaried employee or a self-employed individual. The age requirements vary from one bank to another, but, if you are between the ages of 18 and 60, you will get a credit against a loan.
Here are few things you should consider before applying for a home loan:
It is not possible to obtain a loan of 100% against the worth of gold. Gold loans given can be as little as 60% of the value of gold and can be up to a limit of 85-90% depending on the lending institution.
The price of gold is also fluctuating. There are two ways in which the cost of gold is calculated. Some measure the prices of gold for the past two weeks and then use the average price to decide the rate per gram of gold. While some people take the daily rate to value the gold. Consider the option that better matches you, and the plan that gives the gold a higher worth.
Before you approach the lender, do a background search to know about the security steps taken by the lender to protect your properties. At the end of the day, the gold you pledge should be in safe possession. So select a trustworthy organization that guarantees protection. The odds of fraud with jewellers and lesser established NBFCs are the highest. So be careful when you choose your lender.
However, you have no assurance from the lender that poses the issue of the protection of gold. As there is no documentation or documents obtained from a local vendor. Gold loans are fast that you will get a lot faster than most other loans.
Gold loan interest rates vary from lender to lender. However, the calculation of the Gold Loan is based on two forms as below:
Fixed-rate of interests: The interest rate paid on the loan amount remains unchanged over the length of the loan. As a result, the EMI Gold Loan remains the same during the repayment schedule.
Floating rate of interest: Interest rates thus continue to adjust under market conditions. Also, because the rate is not set, the EMI Gold loan can increase or decrease suddenly.
Gold Loan Tenure
Gold Loans are short-term loans. Most institutions offer a gold loan for a duration of one year, and some can extend it for up to 24 months. So, before you get a gold loan, you must be sure to repay it for the agreed period. Gold loans are a good way of receiving immediate cash to fulfill the needs in case of emergencies.
Lenders have the right to sell your gold if you are unable to repay the loan on time. The lender would like to retain the loan-to-value ratio all the time; that is, greater than the money they have disbursed should be the value of the gold they possess.
The repayment option is another important factor, and there are a few options you could consider.
Bullet payment: The repayment amount of the loan is calculated on a monthly basis, but you pay the full amount, including interest, at the maturity of your loan period.
Upfront Interest: You can pay interest at the beginning of tenure and principal at the end.
Standard EMI: You have the option of paying back the loan along with interest on a month-on-month basis.
Things to note
- The majority of banks charge a minimum transaction fee of Rs 1,000 to 2%.
- If you wish to partly repay your debt ahead of time, it is considered part prepayment.
- It is called foreclosure in the event that you plan to settle the whole debt balance before time.
- In such cases, banks usually levy prepayment or foreclosure costs, and these can vary from zero to even up to 1%.
Documents for Gold Loan
The documents required for availing of the gold loan are:-
- Two passport size photographs
- Identity proof such as PAN card, passport/, Aadhaar card, voter id card
- Address proof (Electricity bill/ telephone bill/ bank statement
How much you will receive on your gold?
You will be given the highest prices for specially minted gold coins from banks of up to 50 grams or 22-carat gold ornaments.
- If you sell hallmarked jewelry, a lower payment fee will be charged and the loan rate will also be lower.
- Your lesser gold loan sum will be granted to lower purity gold ornaments of 18 and 20 carats.
- Diamond, pearl, ruby, etc. Ornaments do not get you a decent loan amount as banks subtract the weight of these gems to measure the total gold weight.