A gold loan is a popular product in India. It is a convenient and easy way to get a loan. However, it’s not that easy to find reliable lenders. You need to do your homework before availing of this loan product so that you don’t end up losing money by defaulting on payments or incurring late fees due to delayed payment cycles. In this article, we will discuss some basic things which should be considered before taking a gold loan so that you don't end up paying more than what was initially promised!
Determine the loan-to-value (LTV) ratio
The LTV ratio is a key factor in determining your gold loan interest rate. This number will tell you how much of your property value goes towards paying back the loan, and therefore how much gold loan interest rate you'll have to pay on top of it. The higher this number, the lower your monthly payments will be — but so will your overall cost of borrowing money from a lender. If you're trying not only to save money but also reduce debt loads or pay off credit cards quickly, then using less than 80% LTV may be ideal for increasing those numbers without increasing costs too much (or at all).
Check out the company's credit rating
When you apply for a gold loan, it's important to check the company's credit rating. A good credit rating means that the lender has been in business for a long time and has proven itself trustworthy. The company should also be accredited by a regulatory body such as FCA (Financial Conduct Authority), so you can rest easy knowing that they'll be around when you have paid the instalments. Finally, if at all possible, try to find out if the lender is giving out loans of this size only to reputable businesses in order to keep their reputation intact—and thus attract more clients like yourself!
Compare the gold loan interest rate with others
When you compare the gold loan interest rates of different financial institutions, it's important to remember that banks have different rules and regulations. For example, some offer lower rates than others for gold loans with longer terms. If you're looking for a gold loan with the lowest rate possible, make sure your bank or broker is licensed in your state and has been working within its guidelines since opening its doors.
The same applies when comparing brokers—they may charge more if they can get away with it! In addition, since each agent works differently from other agents and may have different offices around the country (or world), there may be differences between those two things too: location vs commission rate; how long has this person been in business versus what other clients say about them online forums like Yelp or Facebook reviews; etcetera...
The interest rate of gold loans are charged only on the utilised amount
The interest rate of gold loans is charged only on the utilised amount. This means that if you don't use the full amount, you won't be charged interest on the unused portion.
For example, if you get a loan of ₹100,000 and only spend ₹50,000 on it in total (your remaining balance is ₹50k), then your monthly interest rate will only be 1% instead of 2%. This is because your outstanding balance was used up before being paid off completely by either buying or selling some stocks/bonds etc., which also lowers your risk exposure when investing in precious metals.
Go for a trusted lender and not an unknown one
When you're looking for a gold loan, it's important to know that the lender is reputable. You should check out their reputation and make sure they have an established track record of helping borrowers get the money they need. If they are registered with the RBI, this means they're regulated by central banks or governments around the world. In some cases, lenders may also be registered with state authorities as well, which means that these types of companies follow strict ethics codes when providing their services.
Know more about gold loan interest rates before you avail of one
The gold loan interest rate is the amount you have to pay as the interest of gold loan. The higher this number, the more costly it becomes to borrow money from a lender. However, there are some factors that can influence this figure as well. For instance, if you need a large number of funds for buying gold or investing in stocks or shares etc., then these will be charged at higher rates. Also, consider whether or not you plan on using your loan funds immediately after getting them (this will affect how long and how much interest rate of gold loan you'll have to pay).
Always Compare your options
Finding the best gold loan offer is everyone's goal. Since it depends on the needs of the borrowers, there is no set formula for obtaining one. Before putting their name on the dotted line, one might make sure they weigh all of their possibilities. The first offer you receive might not be the best option for you. As a result, learn all you can about market trends; speak with various banks and financial institutions to learn about their offers; and finally, shortlist a few suitable possibilities. Look for a lender who offers you a loan with a cheaper gold loan interest rate or a larger loan-to-value (LTV) ratio while weighing your options. Lenders like Manappuram Finance Ltfd offer gold loans at affordable interest rates and many other benefits like doorstep gold loans for easy access and to provide a hassle-free environment to their customers.
Gold Quality Matters
When pledging gold ornaments, make sure they meet the minimal purity requirements for eligibility for a loan. Only gold objects that have a purity of 18 to 22 carat or above are approved for loans by creditors. Additionally, while determining the loan value, jewellery with valuable stones embedded in the design will not be taken into account. The loan value will only be determined by the gold's weight and purity. If you are submitting the gold without minimum purity, then the loan amount availed to you will also be different and can be less. So it is our responsibility to buy gold from reputed jewellery.
Qualified Form of Gold
The sentimental worth of ornaments is often higher, which may encourage borrowers to make timely loan repayments. As a result, gold jewellery is the preferred form of collateral for creditors in India. For gold loans, banks do not take gold bars or gold bullion. You can get a gold loan against gold coins as long as they are 99.99% pure and under 50 grams in weight. Along with the previously listed considerations, borrowers must fully comprehend the terms and circumstances of their loans. Most lenders do not impose prepayment penalties on gold loans, so if your lender does, try to come to an agreement or find another lender or come to a proper solution.
Not knowing the terms of the auction
Your gold will be put up for auction if you are unable to pay back your loan on time. To recover the full loan amount, your lender will be allowed to auction (sell) your gold in the market. Therefore, make an effort to explain the conditions of the auction to your lender and inquire about any connected penalties, so that you can take necessary arrangements and actions to consider retrieving back your gold or other ways to repay your loan.
Not taking into account post-sale support
When applying for a gold loan, the majority of borrowers overlook after-sales support. It is also one of the most crucial factors that you should take into account. As a result, you should only select gold loan companies or lenders that have a track record of providing friendly customer service. It will enable you to obtain a loan without difficulty as well as proper follow-up and hassle-free services will also be provided from the financier's side.
In the end, gold loans are a very good option for some customers but they are not suitable for everyone. Before you decide that you should invest in one, it's always good to know more so that you can make an informed decision. The least expensive type of personal loan is typically a gold loan. Despite this, borrowers should exercise caution and take into account factors such as the loan amount, the purity of the gold item, the length of the loan, the lender's method of calculating the interest rate of gold loan, the borrower's personal credit score, and external benchmarking. The actual interest rate of gold loan rate charged is determined by all of this.
Based on several factors related to the borrower, the same lender may charge extremely different rates for the same quantity of gold jewellery pledged as security.