Gold loans are a type of secured personal loans. The loan is offered against the mortgage of gold assets. When you mortgage your gold assets, the lender evaluates the value of the mortgaged assets. Based on the value determined by the lender, the loan amount is calculated. The Gold loan helps you meet any type of financial requirements that you face. The loan is offered within the shortest possible time. Moreover, since the loan is secured against the assets that you have a mortgage, the interest rates are low.
Though gold loans can be availed easily, you should be careful while availing the loan.
Here are the important things which should be considered when you are applying for a gold loan:
1) The amount of loan that you can avail
The first thing which you should find out is the loan amount which the lender is willing to offer. Lenders evaluate the value of gold independently when determining the loan amount. The evaluation depends on the weight of gold valuables that you have mortgaged and their purity. The purer the gold is, the higher would be the loan amount which you can avail. Moreover, if your gold jewelry has stones and other precious metals in its composition, the cost of such items would be excluded. Only the value of gold would be considered for calculating the loan amount. Up to 75% of the value of gold that you have mortgaged would be offered as a loan.
2) Types of gold assets which you can mortgage
Lenders accept gold jewelry, ornaments, coins, bullion and any other type of gold valuable that you have as collateral for the loan.
3) Custody of the mortgaged gold
Unlike in a loan against property wherein you can retain your property, in a gold loan, your gold assets remain with the lender. Once you mortgage your gold, the lender would take custody of your gold valuables and keep them in a secured place. You would be able to get the possession of your valuables only when you clear the total outstanding amount of the loan.
4) Repayment options
A gold loan offers a variety of repayment options so that you can repay the loan at your convenience. The available repayment options include the following –
5) EMI repayments
This is the conventional mode of repaying the loan wherein you pay off the loan in Equated Monthly Instalments. Interest-only EMIs – under this option, only the interest on the loan is paid in EMIs over the repayment tenure. The principal amount of the loan is paid when the loan tenure ends. Bullet repayments – under this option, no EMI is paid over the duration of the loan. The total interest and the principal amount of the loan are paid at once when the loan tenure comes to an end.
When you avail a gold loan, consider the repayment options available and then choose the most suitable one.
6) Comparison between lenders
Gold loans are popular, and therefore they are offered by banks and non-banking financial institutions. However, before availing a loan, comparing is necessary. You should check the loan amount offered by different lenders, repayment options, and the interest rate. Choose a lender which offers the funds that you require at the lowest interest rates. Gold loans would help you meet any type of financial need that you have. However, always consider the above-mentioned points before availing the loan so that you know how your loan works.