Things to take care of while Applying for a Gold Loan
In India, gold has long been considered an investment. It is purchased for festivals, given as a present for important events ranging from the birth of a child to birthdays, and is associated with weddings. Gold is a valuable metal that maintains its worth through time, even when prices fluctuate due to economic policies or geopolitical events. It retains its shine and charm for the majority of Indian families.
If you're going to apply for gold loan, it's crucial that you know some of essential points that you need to be aware of:
1. Understanding the many types of gold:
The better the quality of the gold, the higher the value amount, and hence higher the loan amount you receive. Lenders need a minimum purity of 18 karat gold.
Also, if you pledge jewellery with gems or gemstones, the lender will not include the value of the gems or precious stones in determining the loan amount. Instead, the lender will evaluate only the gold's worth for the gold loan.
2. The lender's credibility:
Choosing the correct lender might be difficult because so many banks and NBFCs provide gold loans. Before asking for a gold loan, be sure the lender is reputable since you will be pledging your valuable jewellery with them. Make sure you read all the documents required for a gold loan carefully before you go forth and get the loan.
Check the lender's customer feedback and security procedures for the security of the pledged gold. Many jewellers and unlicensed lenders also provide gold loans at somewhat lower rates, however, it is best to avoid borrowing from such unlicensed lenders. There have been several cases of fraud using such unlicensed lenders, in which borrowers did not get the pledged gold despite completing full repayment.
3. Interest rate:
Interest rate is essential when applying for a gold loan since it impacts your payback. Because it is a secured loan, the interest rate is lower than that of an unsecured loan such as a personal loan. Therefore, check the interest rate before going forward with the gold loan application.
The interest rate on a gold loan varies based on the purity of the gold and other parameters at the time of loan application. It usually fluctuates between 7% and 15% per annum. As a result, it is prudent to compare the interest rates offered by various lenders. Banks, on average, provide cheaper lending rates than NBFCs. Most banks, however, impose a service fee of 1% to 2% of the loan amount, but most NBFCs do not. As a result, you should compare the overall cost of the loan with a few lenders before making an informed selection.
4. Check to see if it is a reputable lender:
Because you will put your valuable gold as security, ensure the lender is trustworthy. When you apply for a loan against gold, avoid taking a loan from a jeweller or a small business since they may be unregulated and charge unfair terms and conditions.