5 Things to Consider Before Taking a Gold Loan

Gold loans help in times of uncertainty and financial crisis. It is one of the most common loans that the Indians rely on during rainy days. Every household in India has gold in the form of jewelry or biscuits, which they keep for emergencies.

Gold loans are secured loans that can help you get instant cash in exchange for jewelry. There are various offers and conditions on the gold loan which you should know about. Here are 5 things that you should consider before applying for the loan:

● Valuation of gold:

The quality and weight of the gold play an essential role in getting the loan amount. The purity, weight, and value determine the amount and your eligibility for the loan. The value of your gold should be around 18-24 carats to be eligible for the loan. You cannot just go with any gold item to get the loan, as only pure gold items are considered for the loan.

● Tenure:

Before applying for a gold loan, you should know everything about the tenure duration. Gold loans are considered short-term loans with a tenure from seven days to three years. There are various repayment choices that you will get with the loan, so make sure to choose the tenure which will help you in reducing the financial burden.

● Interest rate:

The lender decides the interest rate on your gold loan after doing the risk assessment. The rate can range from 7-25 percent per annum depending on the ratios and other parameters based on the gold.

● Repayment options:

The lender on a gold loan provides several repayment options. You can take up partial payments, bullet payments, or EMI payments to fulfill your loan amount. The repayment of your loan happens monthly, and you can decide on the plan according to your financial needs.

Make sure to choose the repayment options that will help you the most while considering the processing fees and other charges on loan.

● Choosing between the banks and NBFCs:

There are two options to choose from when it comes to selecting a lender. You can take a gold loan from the banks or the NBFCs. The banks offer lower interest rates on the gold loan, and there are minimal documentation requirements, whereas, with the NBFCs, the interest rates are higher.

Though the process of getting a gold loan is simple and quick with the NBFCs, you need to consider the rate of interest before taking the loan. If you think that the banks are a suitable option for you, then go with it or research more about the NBFCs and apply for a loan with them.

Conclusion:

It would help if you considered all these factors before applying for a gold loan to make the process hassle-free at a convenient interest rate. You can also do more research on finding the most suitable lender for the gold loan. Make sure to select the right gold items for the gold and search for plans that offer lower interest rates.