Gold loans have become a common staple for people who are going through financial difficulty during COVID-19. It involves taking money from the bank while keeping your yellow metal as collateral until the loan is paid off. The interest rate in gold loans plays an important role in deciding which bank or non-banking financial company should be trusted for such a loan. The interest rate of gold loans varies from 7.5 per cent to 29 per cent per annum depending upon the loan to value ratio, loan tenure, and repayment options.
Borrowers who are interested in availing of a gold loan are in luck as the Reserve Bank of India has decided to increase the loan to value ratio from 75 per cent to 90 per cent till March 2021. This small change has been made owing to the troubles caused by the pandemic. However, non-banking financial companies that specialize in such gold loans such as Muthoot Finance and Manappuram Finance can’t lend at such a high LTV of 90 per cent.
These extraordinary times comprise of cash crunches in almost every household and such a situation, the demand for gold loans has risen. Banks find it easier if people opt for gold loans as the availability of collateral allows them to ensure less default by people. Gold loans also provide loans at a faster rate and do not require as many documents as any other loan due to the presence of collateral.
While the increase in the LTV adds an advantage to interested borrowers, as they will get higher amounts against their gold but some experts believe that the increase in the LTV for gold also increases the risk for lenders as any change in the price of gold can cause defaults.
There are many factors apart from the interest rate that matter while availing of a gold loan such as the EMI amount, tenure, etc. One must look at all the available information including the extra charges before choosing a bank.
Taking a loan can be very stressful. There are many questions that one ponders over when it comes to taking a loan. Dialabank comes to your aid and clears all your confusion. So stop fretting and call 9878981144.