Gold loans have become one of the most popular credit instruments for those in need of funds during a financial emergency. Willing borrowers can pledge their gold jewellery and obtain a sizable amount. Further, if one keeps gold jewellery with 22 karat purity, they can even secure the lowest gold loan interest rates.
However, there are a few questions one should ask before applying for credit. These questions are as follows:
1. What is a loan against gold?
A loan against gold or simply, gold loan is secured financing option extended by several leading financial institutions in India. Using this credit instrument, borrowers can obtain a high loan amount by pledging their gold jewellery to a lender. Further, they can use the obtained fund for any expenses without any restrictions and obligations.
2. How much gold does one need to keep as collateral?
A financial institution determines the maximum loan amount for an applicant by assessing several factors. One such factor is the purity of the pledged asset. Individuals pledging high-purity gold articles can receive a high loan amount. Hence, applicants must check the purity of gold before applying for a gold loan.
3. What is the monthly instalment that you can pay?
In order to ensure a smooth and hassle-free borrowing experience, one must determine the monthly instalments and make an informed decision accordingly. In this regard, willing borrowers can use a gold loan EMI calculator to know monthly obligations even before applying for credit. This online tool needs three variables (principal loan amount, interest rate charged by the lender and repayment tenure), based on which it displays the EMI details along with the total interest outgo.
4. What is the right tenure for a gold loan?
Selecting the ideal repayment tenure for a gold loan is crucial for better financial management. Applicants should choose tenure as per their financial standing and repayment capabilities. Several financial institutions in India offer repayment tenure of up to 5 years, while some offer a fixed tenure of 12 months.
5. What are the charges associated with a gold loan?
Willing applicants must also check the additional costs associated with a gold loan. Costs such as processing fees, foreclosure charges, pre-payment fees, etc., add up to the total loan amount. Hence, knowing these charges beforehand will help applicants get a rough idea about their repayment structure.
6. Benefits of opting a gold loan?
Those who wish to apply for a gold loan must also know the beneficial aspects of this secured credit facility:
● Low interest rates
Due to gold loans’ secured nature and high market value of gold, the lending risk of a financial institution lowers considerably. As a result, financial institutions usually offer a low interest rate.
● Multiple repayment options
Candidates applying for a gold loan have the option to choose the repayment term as per their financial capability. For example, they can choose the option of paying just the interest amount and the remaining principal after the end of the tenure.
● No stringent credit score assessment
As gold loans are secured with high-purity gold articles, lenders usually do not stress about checking credit scores. This is because the financial institution holds the right to auction the pledged gold and recover the outstanding amount in case of a credit default scenario.
7. What are the gold loan eligibility criteria?
The eligibility parameters or a loan against gold tend to vary from lender to lender. Basic eligibility parameters that an applicant has to fulfill in order to apply for a gold loan in India are applicants must be a citizen of India, Age will be between 21 and 70 years etc.
Moreover, willing applicants should know that they cannot pledge gold bars or coins. They can only pledge gold jewellery or ornaments that are free from other metals as collateral. Further, applicants keeping 22 karat gold as collateral have the chance of getting the lowest gold loan interest rates.
Hence, those searching for “gold loan near me” should keep always consider the above mentioned questions and make an informed decision accordingly. Further, after getting the loan amount, make sure to make timely repayments and keep the gold safe throughout the loan tenure while enjoying a hassle-free borrowing experience.
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