A gold loan is a secured loan in which you pledge your gold ornaments, bars, and coins as collateral. The gold loan has the biggest advantage of being a multi-purpose loan with no end-user constraints. It is one of the most effective ways to obtain immediate cash and meet your individual financial needs.
The COVID-19 pandemic developed an atmosphere of financial uncertainty and despair, with many people exhausting their funds to satisfy immediate needs. Due to the simple availability of gold in our homes, gold loans are great for Indians to manage the financial crisis.
However, people are still oblivious of the factors to consider while applying for a gold loan in India. If you want to avail all the benefits when you apply for a gold loan, you must consider the following five factors:
The credibility of the Lender
To get a loan against gold, you must give your gold coin, bar, or jewelry as collateral to the lender. The lender is responsible for keeping your gold safe until you have completed the full payment. However, even if you pay the full amount, the lender may turn out to be a fraudster and deprive you of your cherished possession.
Before applying for a gold loan, investigate the lender’s legitimacy and reputation. Consumer reviews are critical in determining whether or not a loan is legitimate. You may also use a lender’s history and longevity to assist you to pick the best gold loan finance company.
Methods of Repayment
Lenders frequently offer a variety of gold loan payment options. However, before asking for a gold loan, the borrower must be aware of all potential repayment choices and methods of repayment.
Some lenders even allow you to pay the interest first and then the principal at the conclusion of the term. Others, on the other hand, insist on making interest rate payments monthly, quarterly, semi-annually, and annually, as well as paying the principal amount at the conclusion of the loan term.
Amount of the loan
Another consideration is the amount of the gold loan, which is always calculated based on your gold worth and payback capabilities. The amount of a gold loan varies depending on the lender. It normally varies from 60% to 90%, although no bank or non-bank financial institution will lend you 100% of the value of your gold.
As a result, before choosing the maximum loan-to-value (LTV) ratio for your gold loan, double-check the lender’s policies.
Gold Loan tenure
The term of a gold loan is usually between 12 and 48 months. Before one decides to finance a gold loan, it is crucial to consider his/her financial obligations and payback capacity. Failure to make regular payments can harm your rating and capacity to obtain additional credit in the future.
Identify the Interest Rates on Gold Loans
Consider the fact that gold loans have higher interest rates than educational and residential loans. As a result, you should compare the interest rates offered by various banks. One should choose an appropriate bank or gold loan finance company after evaluating their repayment policy, term, and interest rates.
This is where you need us, IFL Housing Finance, one of the best gold loan companies in India. We are a housing finance company that cares about the housing dreams of both the formal & informal income spectrum. Also, amongst the first organizations in India to claim disbursal in 3 days. You can contact us to know more about our quick and transparent home loan policies.