Investing in gold is not new for Indians. For many, loans against gold are a leading source of credit during financial crises. These loans are amongst the oldest forms of lending and have several benefits such as instant cash, less documentation and many more. However, before going for a gold loan, there are few things that you should keep in mind. These few things are:
As mentioned before, online gold loan do have a lesser interest than personal loans, but the rates can vary from one lender to another. Hence thorough and quick research will help you find the right lender for your requirements. Asking references from friends and family can also assist you in finding the lending institution, which is customer-friendly and provides better benefits. Note that credit score does not play a prominent role in determining interest rates just like personal loans. Hence knowing interest rates online or by discussing with potential lenders like Muthoot Blue to get to get low muthoot gold loan rate would save you time and money.
1. Loan amount
The gold loan falls under the secured type of secured loan. Therefore, your loan limit would depend on the value of your gold deposited as collateral. According to rules of the RBI, the loan to value ratio for gold loans cannot exceed 75% of pawned gold. At present, some lenders are ready to lend anywhere between Rs. 1,000 to Rs. 10 crores. Some lenders are prepared to give you more than 75% of your gold value as they have not put any upper cap on the loan amount.
2. Gold purity and valuation
While determining the amount of loan, the type and quality of the gold, intended to be pledged, is taken into consideration. Lenders evaluate gold either through in-house setup or using third-party evaluators. They usually accept gold bars, ornaments and coins as collateral.
In the current market, gold loans have one of the lowest processing fees out among all the lending options. Most lenders charge 1% or lower of the loan amount as processing fees. Also, most lenders do not penalise if you want to make an early repayment. Even if they penalise, these pre-payments do not charge beyond 1% of the loan amount.
Sometimes, there may be fees applied for the valuation of gold. Lenders can also charge renewal fees on the amount of loan as per the state law. You may have to pay penalty charges in case of late payments.
4. Interest rates
The rate of interest of gold loan varies from lender to lender, depending upon the loan amount, loan to value ratio (LTV), loan tenure and other factors. For example, with a higher LTV ratio, the amount of involved risk also increases, due to which lenders charge higher interest rates to compensate for higher risk of such loans.
Currently, the interest rate for a gold loan can vary from 9.45% per annum to as high as 25% per annum. It is recommended to compare gold loan rates with different lenders before finalising your lender. You can use the online gold loan EMI calculator to calculate the total amount, along with tenure and interest rate of your loan.
5. Ease of access
Due to increased internet connectivity and smartphone usage, you can easily avail a gold loan online. It is easy to apply for online gold loans and can be availed with an instant transfer of the amount to your bank account. You can visit your lender’s nearest branch and deposit your gold, or they can visit your home and collect your gold after valuation. Documentation required for online gold loans is also minimal as compared to other loans.
6. Tenure and repayment options
For gold loans, lenders extend flexible tenures ranging from seven days to three years. They also offer alternative repayment options along with easy EMI mode. You can choose to pay the principal or interest components at the end of the loan period or repay the entire interest upfront. Pick the option that suits you.
7. Loan sanction time
Gold loans have one of the fastest disbursal processes among all non-digital loans. These types of loans require less documentation and are usually sanctioned within a few hours of making the loan application. It is the feature that makes gold loans one of the preferred loan options among consumers.
Due to their fast disbursal and flexible repayment options, gold loans outscore any other loan options. Being a secured loan, some lenders don’t pay heed to credit scores while sanctioning a gold loan which makes it the perfect option for those who have a poor or low credit history. Always compare different lenders before zeroing in on a lender and avail the best deal suitable for you.