You all know that gold is one of the precious metals Indians consume in abundance. It is evident that at hard times Indians rely on gold.
What could be the reasons behind the popularity of the gold loan? How can you apply for the best gold loans? What are their features, and whom can you trust when it comes to gold loans? Go through the article for a detailed explanation covering all the things that you need to know about gold loans.
What is gold loan and what is its utility?
These Loans are under security because the gold acts as collateral between the borrower and lender. The Lender keeps the gold during the loan period. In this way, you are ready to secure the loan by giving possession of your gold. You can get the gold back after returning the whole amount. Gold loan tenure usually lasts between 6 months and 1 year and is mainly short-term. Since you give gold as collateral, you can get attractive gold loan interest rates from the lenders. Most banks and non-banking financial companies offer gold loans at low interest rates.
Various purposes of availing gold loans are:
- To finance gold investments
- For business expansion purposes
- Other business needs like funding and purchasing raw materials
- Other unprecedented expenses
Gold loan interest rates start at approximately 10% per annum.
Features of Gold Loans
- You can fund your various needs by availing of gold loans, such as education fees and medical expenses.
- The gold the borrower gives to the lender serves as the security or collateral for providing the loan.
- The tenure of the gold loan can be between 3 months and 48 months.
- You may have to give additional fees in the form of processing charges, late payment penalties, and charges for non-payment as per gold loan interest rates.
- Lenders usually offer three options for repaying the gold loan:
- You can repay the loan in Equated Monthly Instalments (EMI).
- You can pay back the principal loan amount at the end of the gold loan tenure.
- You can pay the interest rate on your gold loan on a monthly basis.
6. You can also avail of discounts if you regularly pay the interest rates. You can get a 1% or 2% off on the original interest rate.
The reasons behind the growth and expansion of demands
Indian gold loan market is rising gradually with increasing demand. And the reasons behind the rise of the gold loan market are factors like the smooth accessibility of loans, comparatively lower interest rates, easy loan processes, and flexibility in the repayment of loans. The Reserve Bank of India also plays a prominent role in the rise of the gold loan market. It has introduced borrower-friendly options such as Gold Monetization Scheme (GMS) and Gold Deposit Scheme (GDS). Plans like this have made the process of availing of gold loans easier for borrowers. You can mobilize the gold kept at your home or a bank locker. Find the amount of loan you can avail against your gold using the Gold Loan Calculator.
Things to keep in my mind before availing of Gold Loans
To secure the best gold loan, you need to be conscious of certain things like:
- You should know the minimum and maximum amount of Loan Amounts before availing of a gold loan. And you should ensure that you have enough gold for that particular amount you want.
- When you compare secured and unsecured loans, it is clear that gold loans have lower interest rates. You should also keep in mind the fact that these interest rates can vary from lender to lender. So, before deciding to avail of a loan, you must compare the interest rates lenders charge and choose the best one.
- You should pay additional charges like- processing and documentation fees, payment failure fees, and appraiser charges. These additional charges plus; the interest rate can increase the total amount of the loan. So, you should keep the amount that lender levies in your mind before pursuing a loan.
- As we said earlier, the repayment of the gold loan tenure longs between 3 months and 48 months. So, you should acknowledge your ability to repay within that time before proceeding with the loan.
- Another vital thing to notice is the credibility of the lender. If you can rely on them for your gold is a question of concern that you should consider. Check the safety measures the lender takes and ensure the lender gets the best reviews from borrowers.
- Gold loan repayments are often flexible. You should consider the payment structure lenders offer before pursuing the loan and go for the one that suits you.
- Loan features, benefits, and requirements may be different for various lenders. So, you should give a keen comparison before choosing to proceed with the loan with a particular lender.
- Also, before applying for a gold loan, you should check whether you are eligible for that particular loan.
Benefits of Gold Loans
Some benefits of securing gold loans are listed below:
- Since gold loans are short-term, their tenure ends quickly.
- Only a few documents are required, and the loan process is easy to understand.
- There are no prepayment charges in specific cases.
- You can avail of the best gold loans at lower interest rates than unsecured loans.
We hope you got a clear picture of the demand, benefits, and other important factors related to gold loans that a potential borrower must know. Now you can use your jewellery that is idly sitting in your house lockers and can use it for meeting your needs. You can also build your finances by securing loans at low interest rates.
For further doubts and queries, you can consult help from financial experts like Piramal Finances. They provide efficient guidance and solutions to people regarding finance matters.