The needed monetary funds for personal use can be arranged through our own gold jewels. Because the banks and NBFCs give money to the people against their gold, the life of the people get easier and simpler. Furthermore, the Gold Loan make the life of the people easier by omitting the financial crisis for achieving their dreams. As we know gold loans are easily available as well as widely advertised today, It is easy to avail on the contrary there are top 5 mistakes to avoid while making a gold loan application.
1. Not evaluating the credibility of the lender
When you take a gold loan, you essentially pledge your gold to a lender for a sum based on its valuation. As a benefit sponsored loan, your gold remains with the lender until complete repayment. Check the credibility of the lender and make comparisons on lenders online. You can use the services online platform to compare lenders on factors such as the annual interest rate and processing fees.
2. Not looking at enough choices
There are different Banks/NBFC’s willing to give you a gold loan today and everyone has a different proposition for borrowers. While looking at gold loan options it is good to check all choices before making a final choice. Pretty much every Banks/NBFC’s has a competitive and attractive gold loan proposal. Try to get connected with as many lenders as you can and compare their offerings based on the rate of interest and Loan to Value ratio and arrive at a shortlist. After that, you can then make a final choice based on the best offer depending on your need.
3. Not knowing your gold
Gold loan avail through gold ornament with a purity of 22 karat and above. Further, gold bars, bullion or gold coins above 50 gms are not accepted as collateral by Banks and NBFC’s. Thus, it is important to know your gold as well as its purity moreover valuation before you make an application for a loan against it.
4. Not knowing LTV (loan-to-value) on your gold loan
When you apply for a Gold loan, you have to keep this in mind that you may not get the full value of gold as the loan amount. As per the RBI rule, the LTV ratio of a gold loan cannot exceed 75%. For example, if the value of your gold is Rs. 2 lakh you can get a loan of up to a maximum of Rs. 1, 50,000. This ratio determines the amount you can get against your gold ornament. Different Banks/NBFC’s use different parameters to calculate as a borrower; you must know what goes into the calculation of the LTV ratio of the lender.
5. Not understanding EMI option
Gold loans are not only easier to get, as they are a secured form of lending, lenders often offer the benefits of different repayment facility to their borrowers. Here are 4 Different Ways of Repaying Your Gold Loan
- Regular EMI option
- Make Partial Payments
- Bullet Repayments
- Pay Interest as EMI & Principal later