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Gold Loan and Repayment

November 25, 2020 | posted in News | posted by : Manappuram Finance
For generations now, gold has managed to attract admiration. It isn't just jewellery, it has also been a saviour for many, acting as collateral to get hold of some quick loans. 
Gold has come a long way from pawnbroking to becoming one of the most prized collaterals that, when pledged, can avail you hassle-free loans from banks and NBFCs alike. Gold loan is a secured loan as it is provided against collateral unlike other loans in the market like personal loans or credit card loans. Being a secured loan, gold loans come at a lower cost than unsecured loans and hence are relatively easy to pay off. Banks and NBFCs have been competing to provide the cheapest gold loans available in the market and have classified gold loans based on the mode of repayment. Let's take a quick look at the modes of repayment here:

Payment in Parts

You may make the payments in part (interest and principal amounts) at the time of your choice. You could even opt to pay the interest and principal amount completely or in parts without any constraints of a fixed schedule. Repaying the principal initially will also reduce your interest which is usually calculated on the outstanding loan amount.

Pay Interest first & Pay Principal Later

The payments would only include the interest component while the principal (the whole borrowed amount) can be paid once the loan reaches maturity. This mode sees to it that the borrowers don't get holes burnt in their pockets as regular payment of insurance prevents the compounding effect, which otherwise can become burdensome. 

Bullet Repayment

No interest payment, and no repayment of principal until the end of the loan term. We agree it is a bit hard to believe but yes, the bullet repayment mode is real. Here, you don’t have to deal with EMIs. You have to repay the whole amount (including the principal and the accumulated interest) at the end of the term as a single lumpsum payment.
Gold loans also let you prepay the whole amount at any moment you like without attracting any prepayment charges or penalty. They usually have a short loan tenure but it can be renewed almost indefinitely. Paying off the outstanding loan amount and the up-to-date interest will close your loan account with the lender and you will be handed over the gold which belongs to you.

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