A hike in LTV Ratio in gold loans can backfire for you

A recent development by the Reserve Bank of India (RBI), has increased the loan to value ratio, known as the LTV, from 75 percent to 90 percent. This means that while the price of gold remains the same, you get a higher loan amount. This has proved to be a piece of good news for anybody looking to take a gold loan who is going through a cash crunch during the pandemic. In fact, COVID-19 has been the reason behind this change. However, some experts believe that this advantage can turn into a disadvantage very easily if the prices of gold fall drastically within the speculated time.

In fact, in the last two days, the prices of gold have fallen from Rs 56,000 per 10 grams to below Rs 50,000. Therefore it is of utmost importance for anyone to understand how the market of gold loans works before applying for one.

hike in the LTV will keep customers on an edge as fluctuations in gold prices, which have been very common this year, can make any institution providing the loan, ask the customer to return payment of the loan amount, which might further cause more confusion among the people. It will affect the peace of mind of people, as said by Rachit Chawla, the CEO, and Founder, Finway. Normally, when you produce your gold to a bank for a loan, the bank verifies the loan and checks the market price of gold and the demand for it before announcing the loan amount. The increase in LTV, threatens to disturb this peaceful age-old process.

If price of gold falls drastically, which remains a possibility and if the value of gold produced as collateral for the bank falls below the minimum margin requirement, which is 10 per cent at present, then the bank will ask you to meet the shortfall in margin maintenance by paying an additional amount which might cause more pressure for someone going through a cash crunch.

Taking a loan can be stressful as there are many questions that people ponder over when it comes to taking a loan. Dialabank comes to your aid and clears all your confusion. So stop fretting and call 9878981144.


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