Taking out a gold loan is a popular new method of getting rapid cash. Bank vaults are being broken into to retrieve gold so that it can be sold for a profit. Curiously, the available information on gold loans is hazy, leaving you a little confused about the specifics of the gold loan sanctioning process. Where do you even start? Keep reading to find out the steps needed to follow before you apply for gold loan.
The first thing you need to do is determine if you qualify for a gold loan. Gold loan calculators are available online from a variety of banking and non-banking financial institutions (NBFCs), but the actual question is: how to achieve the maximum principal amount possible when taking out a gold loan? Here’s a comprehensive guide about the gold loan procedure to help you figure out how to avail a gold loan.
Amount Of Loan Is Based On Gold Price
Gold loans are offered by a number of banks and NBFCs, albeit the amounts available from each institution vary. When the gold’s purity is higher, you can borrow more money against it. Gold is evaluated by the banks’ and NBFCs’ in-house gold evaluators to ensure its authenticity and quality. This is used to determine the maximum amount that can be approved. The Loan to Worth (LTV) ratio and individual lender policies determine the percentage of the gold’s value that can be borrowed.
This means that if your gold is worth 1 Lakh, you will only be able to borrow between 75,000 and 90,000. Before you apply for gold loan, you should find out the most you may borrow from a particular bank. Gold in any form (coins, jewelry, etc.) must be 18 carats or above in order to be accepted as collateral.
Confirm the lender’s reliability
It can be difficult to find a reliable gold loan provider among the many banks and NBFCs currently offering this service. You should verify the lender’s legitimacy and trustworthiness before submitting an application for a gold loan. Since you are promising valuable jewels, you will need to exercise extreme caution.
You should research the lender’s reputation and the safety procedures they’ve put in place to protect the gold you’ve promised. Gold loans can also be obtained through several jewelers and unlicensed lenders, often at somewhat better rates. However, offers from unlicensed lenders should be avoided. Many customers who have borrowed from unlicensed lenders have been victims of fraud, with the gold they were promised never arriving despite full repayment.
The rate of interest
Since the interest rate is what establishes the monthly EMIs, it is an essential consideration in the process of applying for a gold loan. Because a gold loan is a secured loan, the interest rate is significantly lower than the interest rate on other types of loans, such as personal loans. The annual percentage rate of return (APR) on a gold loan can range anywhere from 7% to 15%, depending on the lender. This APR is expressed as a percentage rate.
At the time when the gold loan was taken out, the interest rate was determined by a number of factors, including the purity of the gold. As a result, you need to investigate the various interest rates offered by different lenders. When compared to NBFCs, banks offer a significantly lower rate of interest on deposits. While banks will impose a processing fee equal to 1% to 2% of the loan amount, non-bank financial companies (NBFCs) will not. Therefore, prior to taking out a loan, you ought to evaluate the overall cost of the loan by comparing the terms offered by a few different lenders, and then make a decision that is well-informed.
As opposed to alternative lending options, why is a gold loan more preferable?
A gold loan is favored over other forms of borrowing due to its quick approval and cheap interest rate. The interest rate on a gold loan might be lowered if the borrower has a stable, high income. Loans can be obtained against precious metals such as gold in the form of jewelry and coins. The lender will hold onto the gold item until the loan is paid off. The loan offered may be a larger percentage of the value of the asset, which can be higher than the case with, for example, land or real estate.
The paperwork required to apply for gold loan is minimal. Furthermore, the approval procedure, loan amount, or interest rate levied have zero bearing on the borrower’s credit history. There is a large unregulated market for gold loans that includes local lenders and pawn shops, but borrowers should always choose respectable lenders which provide loans without the usual bureaucratic red tape, along with competitive interest rates and low fees.
