In today’s economic climate, people are starting to take out gold loans more and more frequently, as it allows them to obtain the money they need without tying up their property or placing long-term debt on their credit cards or mortgages. However, some people make mistakes when taking gold loans, which cost them in the long run by increasing their monthly loan payments. If you’re thinking about taking out a gold loan and would like to avoid these common mistakes, read on!
1) Confusion Over Basic Terms
Before applying for a gold loan, it’s important to be clear on some key terms. What is meant by buying or selling gold? For example, you might buy an item of jewelry that contains several carats of gold and sell that piece. Or, if you already own some gold that has intrinsic value—such as in coins or bars—you could use it as collateral with which to borrow money; essentially, trading your existing gold holdings for cash in exchange for interest payments over time. In short: The actual product (gold) isn’t changing hands; instead, ownership rights are transferred via contracts called futures.
2) Lack of Understanding About Fees
If you are taking a gold loan to increase your purchasing power, then you need to understand that there will be some fees associated with these loans. If you don’t pay attention to these fees, they can eat your profits. You want to make sure that they don’t get out of hand. You should never take a loan if those fees make it impossible for you to pay them back within a reasonable amount of time.
3) Taking Too Long to Repay
While gold loans are meant to give you some money to tide you over until your next paycheck, they’re still loans. You should pay them back as quickly as possible to avoid interest charges and late fees. At that same time, it’s also a good idea to consider exactly what you want from your loan and whether or not taking out a smaller amount for an extended time is preferable.
4) Buying Gold at an Inflated Price
You have to think about where you’re buying your gold from. If you buy gold from an auction or independent seller, there is always a chance that it is not 100% real. The best way to avoid paying for gold that isn’t real is to work with a gold loan provider instead of buying directly from an auction site or individual seller. A gold loan provider can offer loans based on real weight and guarantee that you are getting 100% pure gold when you take out your loan.
5) Unnecessary Worries About Online Security
Many consumers worry about their online security when they take gold loans, but there’s no need to fret. While they may not be as safe as, say, a bank account or credit card (which can leave you vulnerable to identity theft and other problems), gold loans are still secure enough for most purposes. For example, companies that process gold loans are generally required by law to keep information about borrowers confidential. In addition, secured transactions that use gold—like taking out a loan—are often just like cash transactions; these loans don’t require any collateral. This means your lender doesn’t have any rights over your items if you default on payments; instead, they can only sell off your property if they haven’t been paid back on time or in full.
6) Not Completing the Application in Full
Have you ever walked into a loan office and handed over all your paperwork and documents only to be told that you’ve forgotten to do something? It’s frustrating. Well, imagine if that happened when you were trying to get a gold loan. The last thing you want is an incomplete application to result in your not getting your money on time. So take your time and complete every field on our application form with care.
7) Not Calculating How Much They Can Afford To Borrow
When we think about taking out a loan, we often start to conceptualize it as free money and lose track of how much we can afford to borrow. Before taking out a gold loan, sit down and add up all your monthly expenses – rent/mortgage, car payments, credit card payments and utilities – to see exactly how much you have leftover at month’s end. Calculate what an additional payment on your new gold loan will look like; if it doesn’t fit in with your financial situation, reconsider taking one out. If you’re already living paycheck-to-paycheck, you might want to wait until things get better before trying to get into more debt than is necessary.
8) Selling Precious Metals Before Repaying the Gold Loan
Precious metals tend to increase in value, so if you sell your precious metals before paying off your gold loan, you could lose out on significant gains. Repaying your gold loan early will save you money on interest—as well as add value to your portfolio.
9) Preferring to Keep it as Insurance Rather Than Paying Off Debt.
If you need money and don’t want to sell your gold, it may make sense to borrow against it. However, because gold is often purchased for personal security and family safety, many customers end up keeping their gold as collateral for debt instead of using it to pay off loans or credit cards. If you’re considering taking out a loan against your gold, remember that if you keep it as security in case things go wrong with your finances again, they probably will. Sell your gold when you take out a loan—and use what cash you can get from doing so to clear any outstanding debts. You won’t have anything left over after—but at least all those unpaid bills will be gone too.
10) Letting Friends or Family Know About Your New Gold Loan Arrangement.
You might want to tell close friends or family members about your new gold loan arrangement, but don’t mention it to anyone who doesn’t need to know. There are two reasons for staying mum: First, gold loans should be kept secret to be used as backup sources of income when necessary. Second, sharing information with non-trusted parties may encourage them to ask you for their loans—or worse, share details of your plan with other people.