Things You Should Consider Before Applying for a Gold Loan

Gold has been regarded as a good option to invest money in for many decades. In India, many people prefer gold over any other asset, as it is easy to sell in times of need, and its value grows over time. In times of need, people used to sell their gold to raise funds. But in the last few years, getting money for your gold has become very easy. On top of that, there is no need to sell your gold as you can take a gold loan instead.

Many banks and NBFCs now provide their customers with the best gold loan offers. If you have gold in the form of coins, jewelry, or bullion, you can apply for a gold loan and get the money in a few minutes. Like any other loan, you must be careful while taking a gold loan; if you cannot repay the EMIs on time, the lender can forfeit it. Read on to learn more about getting a gold loan and what points you must consider before you apply.

What is a Gold Loan?

A gold loan is a secured loan wherein the lender will offer you a certain percentage of the value of the gold in the form of a gold loan. The remaining percentage will be a security for the lender to recover money if you cannot repay the loan. The gold will be put in a sealed bag and will remain with the lender till you repay the loan. As it is a secured loan, the interest rate on a gold loan is lower than on a personal loan. The loan tenure, in this case, can go up to 60 months.

When it comes to repaying the loan, there are two options. You can opt to pay the EMIs as per the loan terms, or you can only pay the interest during the loan tenure and then make a lump sum payment at the end of the term. Most lenders do not levy any foreclosure charges if you close the gold loan before the term is complete.

The loan process only takes a few minutes to complete. The lender will call a valuer to assess the value of the gold and then offer you a certain amount as a loan. If you agree, you must sign the loan agreement and provide your bank account information. The amount will be sent to your account in a few minutes. You can use this gold loan for any needs that you may have.

Things to Consider Before Applying for a Gold Loan

To make the most of this facility, you must select the best gold loan provider. This will help ensure you get the best deal on your gold loan without affecting your finances. Here are some key aspects you must take care of when you decide to apply for a gold loan:

• The Right Amount: You must note that the amount you apply for as a gold loan should be enough to cover your needs. If you apply for a higher loan amount, you will need to give that much gold as a security. Also, your EMIs will increase along with the loan amount. This can put some stress on your finances. Most lenders offer between 70% and 80% of the gold’s value as a loan. So, make sure you apply for the right amount as a gold loan; otherwise, it can be an issue that can also put your gold at risk. 
• Best Gold Loan Provider: Some banks and NBFCs claim to offer the best gold loan. But don’t take their word for it. Not every loan offer is good for you, and you must opt for a loan that can meet all your needs. Hence, it would be best to research online to check the various loan offers available. From these offers, you can compare the terms and rules of the lenders and then select the best gold loan for your needs. 
• Interest Rate: A gold loan is a secured loan, so the interest rate is lower than that on personal loans. However, it is still a cost you will have to bear for the entire term of the loan. So, make sure you select a lender who offers the best gold loan interest rate. This will help lower your EMIs and reduce the loan’s overall cost. 
• Charges: Many lenders claim to offer ‘nil charges’ on gold loans, but that might not be the case. You must check the loan terms and rules carefully. Check for all the charges the lender will charge in processing fees. Also, it would be best if you asked for no charges for prepaying the loan. This ensures that if you have extra funds, you can repay the gold loan before the end of the term and save money on interest. 
• Customer Support: Good customer support is the hallmark of the best personal loan. You must ensure that the chosen lender is known for its customer-friendly approach. The lender must also offer the option to make payments online and allow you to access your account details online. This will save you the hassle of visiting the lender’s office whenever you need information on your gold loan.

Conclusion

A gold loan is a good option when you urgently need money and do not want to pay a very high-interest rate. However, it is still a loan, and you must therefore opt for the best gold loan to have a hassle-free time. If you want to know more about gold loans or other loans that you can avail of, check out the latest blogs and articles from Piramal Finance.