5 Must factor to keep in mind before availing a Gold Loan

In India, availing Loan against Gold is one of the most common and easiest things. Mostly houses in India keep yellow metal i.e. gold which can be given as collateral while availing a Gold Loan. However, Gold Loan’s popularity increased during the last decade when Kerala-based specific gold loan NBFCs such as Manappuram and Muthoot Finance spread their wings to different parts of the nation. Afterward, banks began promoting this product as well. Being a customer, if you’re going to apply for a gold loan, you need to remember these four things.

1. Purpose and tenure of loan - As we know Gold loans are nothing but short-loans, and the maximum tenure is one year. It is extremely important that you shouldn’t avail a gold loan unless it's urgent and before taking a long one ask yourself, ‘will you be able to repay the loan sum at the exact time or not?’. It is recommended to not apply for a gold loan for any risky purpose.

2. Interest rates and other charges - When it comes to the interest of gold loan then it’s usually higher than other types of loans, especially if you avail a loan from an NBFC. Before stepping ahead to the option of gold loan check if other sources can help you full fill your need otherwise you can take a loan against gold but don’t forget you have to repay it within a particular duration. You may also face the other charges like processing fees and prepayment charges.

3. Loan sum - The maximum loan sum depends upon one lender to another. With NBFCs usually, you will get a higher range of loan sums. If we talk about product variations then this is higher in an NBFC as well. Don’t forget you won’t receive the whole value of gold in the form of a loan, as the lender keeps a margin sum. Comprehend the valuation methodology received by the banks, as this determines the sum of the loan you are able to get.

4. Understand repayment terms - The repayment structure varies depending upon the moneylender. A few banks permit payment of principal toward the end of the tenure, while some require payments to be made as EMI, where both principal and interest are paid during the loan duration or tenure. Enquire these points before you finalize the moneylender.  

5. Gold’s purity and valuation- The purity, as well as the type of gold intended to be pledged, is one of the major factor determining the loan amount. The Banks/NBFC usually accepts gold ornaments, coins and jewelry (necklace, bracelets, rings etc.) as collateral. The loan amount depends upon the weight of your collateral gold. 

 

HDFC Bank Gold Loan          Manappuram Gold Loan         Muthoot Gold Loan