Gold has had a reputation as a store of value for ages. The precious metal is a great asset to address emergency cash requirements. Whether you face medical exigency, financial liability, or need capital for business expansion, it is the most accessible collateral. Now with online gold loan availability, it’s become even more accessible.
Benefits of Gold Loan
- Do not have credit score and income proof requirements.
- Are immediately disbursed after checking the weight and purity of gold.
- Have the lowest interest rates as gold carries lower risk. Gold is a secure asset as the value or quality does not deplete over time.
- Come with flexible repayment options. For instance, you can pay only the monthly interest as EMI and make a bullet payment of the principal at the end.
Things to Remember Before Applying
A loan of any type is influenced by the collateral, borrowers’ credit legitimacy, and the market interest rates:
- Purity of the Yellow Metal
You can only lend gold of 18 to 24-carat purity. Gold jewellery, coins, or bars with any less purity render the loan to be cancelled.
- Gold Prices
Soaring prices of the yellow metal make the interest rates for a gold loan go down. As the risk involved declines, lenders happily accept gold as collateral. Additionally, higher gold prices mean a larger amount can be borrowed against a certain weight of gold.
- Loan-to-Value Ratio
Depending upon the weight of gold you wish to pledge, your LTV changes. In general, NDFCs offer up to 60% of the gold value as a loan whereas banks offer up to 70% of gold as a loan. You can also calculate LTV online, with a gold loan calculator if you know the exact weight, purity, and amount you wish to borrow.
- Repo Rates
The RBI repo rates directly impact the interest rates at which creditors give loans to borrowers. As repo rates improve, interest rates decrease which translates to making loans more accessible for borrowers.
3 Golden Tips to Borrow Against Gold
Gold in India has sentimental value attached to it. The unspoken rule while borrowing against gold is to be prepared to pay it back on time to avoid risking the loss of the physical asset.
- Perform Due Diligence on Lenders
NBFCs and banks regularly offer competitive interest rates and higher LTVs for gold loans. Some of them offer online gold loan application facility, wherein once applied a representative visits your place to pick the gold and disburse the loan amount. Although this relieves you from the effort to carry and deposit gold, ensure that you verify their credibility.
You are going to pledge your precious jewellery. It is non-negotiable that the creditor is trustworthy. You can verify this from testimonials and feedback.
Be aware that unauthorised lenders may not return your gold even after full repayment. They offer the lowest interest rates for a reason! Do not become a victim of a scam to prevent some extra payment for the security of a registered and verified lender.
- Get Your Loan Insured
As mentioned above, gold entails emotional value. Hence, pick a lender that offers insurance for the gold as well. You trust someone with your asset. They keep it in vaults or secured lockers. However, nothing is ever 100% risk-proof. Theft, robbery, loss of the asset due to an unavoidable event is never off the table. Getting an insurance ensures that your loss is at least reimbursed though emotional value can never be. You can apply for insurance along with the gold loan, online as well.
- Compare Interest and EMIs
Calculate interest implications and EMIs of the gold loan online using a gold loan calculator for all the lenders you are considering. Take into account their processing charges, weight or purity charges, gold insurance charges, and all other hidden charges carefully. After thoroughly comparing, opt for the most suitable repayment plan, as the goal is to get your jewellery back after getting through the emergent cash crunch.
Borrowing is inevitable under certain circumstances make sure you follow thorough due diligence to have an easy repayment experience.
