Factors to Consider Before Applying for a Gold Loan

According to a report, the gold loan segment in India saw a growth of Rs.60,725.60 crore by 26th March 2021. This growth can be attributed to its simple eligibility and affordable interest rate levied on the credit form.

Due to higher gold rates, individuals are able to avail themselves of considerable funds easily. However, individuals should keep certain factors in mind to avail the said benefit and more from this secured credit form. This will help in making an informed choice.

What are the things to check before availing of a gold loan?

The RBI has increased the loan-to-value ratio on gold loans from 75% to 90%. This decision has increased opportunities for availing of a high-value gold loan online easily.

Moreover, as a secured credit form, a gold loan removes the hassle of fulfilling stringent eligibility and documentation. Individuals can obtain a sizeable amount against their collateral which comes with no restriction in usage. This feature makes the credit ideal to meet big-ticket expenses and emergencies.

Here are some necessary factors that a potential borrower should check to make the most of this borrowing-

  • Credit availability

The loan amount against the collateral is based on the evaluation of gold purity. Ideally, potential borrowers are suggested to pledge gold articles with at least 18-24K purity. Additionally, the current market value of gold also becomes a deciding factor.

Individuals should assess their gold article’s value before making an online gold loan application. This will remove the confusion regarding loan availability. However, a borrower should evaluate their credit requirement and repayment capacity before making a borrowing decision. This will decrease the risks of defaulting or debt-like situations.

Financial planning is always beneficial to make a healthy savings. This habit must be maintained in terms of a gold loan too.

  • Repayment options

Availing a credit form obligates a borrower into a long-term repayment structure. In terms of a gold loan, borrowers get the option to repay as per preference.  Many lending institutions allow borrowers to pay the interest amount upfront and the principal amount when the tenor ends.

They can also choose to pay regular monthly instalments, which comprise both principal and interest amounts. Individuals can opt for a traditional EMI structure too. Since these options come with different variables, borrowers should evaluate their financial capability beforehand.

In this regard, finding the best gold loan lenders offering better features also becomes essential. For instance, reputed NBFCs like Bajaj Finserv extend part-prepayment and foreclosure facilities, lowers the burden of penalties.

  • Interest rate and tenor

The interest rate on a gold loan is dependent on the loan amount availed. However, individuals must know that interest rates vary across different lenders. It is, therefore, essential to compare different lenders to find the most compatible option.

Though gold loan lenders are flexible about CIBIL scores, maintaining a good credit history will further substantiate an individual’s reliability. They can convince a lender to levy an affordable interest rate on a gold loan.

Apart from interest obligations, individuals should also focus on repayment tenor to manage the funds efficiently. Choosing a shorter tenor helps make healthy savings by reducing interest outgo.

Following a planned structure will help make the borrowing successful.

  • Loan processing time

An individual can avail of a loan when there is an immediate requirement of funds or a financial backup. A gold loan fits perfectly for this requirement. The simple eligibility and documentation make the application and disbursal process quick and hassle-free.

Lenders generally require KYC documents for identity and address verification. This is a part of their protocol to assess a borrower’s reliability. In terms of eligibility, the age bar is 21 to 70 years.

The applicants need to possess at least 18 to 24k gold articles to avail of the loan. Lenders carry out the gold evaluation process and disburse the amount if all parameters are satisfactory. Hence, potential borrowers must fulfil eligibility criteria and keep the documents handy to streamline the application process.

These are some of the essential factors that every gold loan applicant must check beforehand. Since this credit form offers multiple benefits, following a planned approach would help make the most out of the gold’s equity. However, keeping the current economic scenario in check, finding a sustainable financial backup will be beneficial for potential applicants.

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