Things to know befoe taking a Gold Loan

Gold Loan

The gold loan is a secured loan that is lent instead of gold ornaments such as jewellery. The loan amount sanctioned by lenders is generally a percentage of the gold. Repayment is similar to any other loan through monthly instalments. Get to know everything about loan agaisnt gold before making a final plunge.

After the entire amount is repaid, you can get the gold back. 

Gold loan is not like other secured loans as there are absolutely no restrictions on the end-use of these loans. 

Gold loan these days are growing at a good pace in the market because the sheer convenience of getting a loan on something like gold is an excellent boost for the Indian households. The interest rates are so low, and they approval process is so much faster. Everything together adds to giving an individual a very convenient option to borrow.

Gold is not only a precious metal but also a valued metal in the Indian household. Hence pledging gold for money raises safety concerns for everyone. With currently all the leading nationalised and private banks and NBFCs offering gold loan, the process has become safe and standardised. But there are a few things that you need to keep in mind before opting for a gold loan.

Do not forget to check creditor’s credibility: In a gold loan, the gold is pledged with the creditor. What if the creditor turns out to be a fraud? The reliability of the creditor here is essential. The only way to ensure safety is to opt for well-established banks and NBFCs. The deals provided by these institutions might not be very lucrative but do not opt for any lender who does not hold a proper reputation in the market. Do not just google gold loan near me and rush to any lender without verification and apt research.

Compare all your available your options: Everyone wants to get the best deal whenever they are applying for any loan. The only way to do this is to compare all the options available to them as per their requirement. Research a little before taking the loan find a creditor who gives either a high LTV ratio or lower interest rate. 

Consider wisely the repayment structure: When looking for a loan offer, consider the repayment structure offered by the lender. Being a customer, you should always enquire about the repayment structure with their creditors. A detailed understanding of the loan repayment terms will help you choose the best repayment option and plan your finances better. 

Calculate the Loan to Value (LTV) ratio: LTV is the ratio of a loan to the net worth of an asset. This ratio is used for risk assessment by the creditor. Higher the LTV, higher will be the risk involved. 

Be aware of the purity of gold that qualifies for loan: While pledging gold, do ensure that it qualifies the purity criteria of the gold loan. Creditors generally approve loans only on gold objects that exhibit Know the form of gold that qualifies for the loan: Ornaments tend to have more sentimental value especially for Indians, which may motivate borrowers to repay the loan amount on time.

Hence, in India, creditors prefer to take gold ornaments as collateral. Banks do not accept gold bars or gold bullion for the gold loan collateral. Loans can be availed against gold coins, but they must be 99.99% pure, and the weight must not exceed 50 grams.

Also Read : Gold Loan as an alternative source of income