A quick and easy way of securing finance, a gold loan has emerged as one of the popular options in India. Through a gold loan, idle gold can be monetised for meeting urgent personal or professional requirements. In the current scenario, as the pandemic and lockdowns continue, cash crunches are common. An online gold loan can be a boon during uncertain situations.
Since it is a valuable asset, you can pledge your gold to a lender for financial assistance. Gold loans are usually short-term loans with less paperwork as compared to other loans. Since lenders normally do not need to check credit scores or assess borrowers’ repayment capacity, getting a gold loan is quick and easy. You can apply for a gold loan from a bank or a Non-Banking Finance Company (NBFC). However, to find the best gold loan for yourself, consider these important points.
Choose the right lender
Since you will be pledging your precious gold as collateral, make sure the lender you select is trustworthy. It is a myth that gold loans are offered only by jewellers. Approaching unregulated financiers may lead to fraud, unreliable valuation, or unfavorable terms. Instead, opt for a bank or an NBFC as both offer gold loans. Usually, you can get a higher loan amount from an NBFC and a lower rate of interest from banks. However, make sure you check the other features or services before shortlisting the lender. It may be easier for you to get a loan from an NBFC as they have simpler eligibility criteria and minimum documentation.
Check the interest and foreclosure charges
The rate of interest on a gold loan is much lower than that of collateral-free loans, but getting the lowest rate depends on you. Do your market research to identify the best gold loan in terms of interest and other features. Keep the market prices of gold and inflation in mind too and borrow when the interest rates are lower to make repayment stress-free. Sometimes, it helps to borrow from a lender you already have a past relationship with to get the most competitive gold loan interest rate.
In addition, check all the other fees and charges. All this can add to the cost of borrowing. Usually, applying for an online gold loan is wise, as it comes with a transparent fee structure. Since you may want to become debt-free before the end of the tenor, check the foreclosure fees. Usually, lenders charge up to 1% with GST, but you may also find lenders who have nil charges.
Select an ideal payment option on a gold loan
Remember that when it comes to gold loans, lenders usually give you a variety of repayment choices. Select the method that best suits your finances and inflow of cash every month. You can either repay in regular EMIs or you can choose to only pay the entire interest during the beginning of your loan tenor and pay the principal at the end of the tenor. You may also be able to pay interest-only EMIs every month or quarter and repay the principal at the end of the tenor.
Assess the purity and nature of your gold
Do note that a minimum purity of 18 carats is accepted by lenders, so submit your collateral based on this. Many lenders also do not lend against gold bars though jewelry and gold coins are considered. In the case of jewellery, other precious metals or stones are not considered by lenders during the evaluation process, so keep this in mind. In the case of coins, lenders may ask for higher purity, put restrictions on the maximum weight they accept (usually 50g), and also accept only bank-issued coins. Ensure you check these limitations before you apply for a gold loan.
Evaluate the result of non-payment
While charged for a penalty fee when you miss an EMI or when you miss the repayment deadlines, there are more serious consequences of default on a gold loan. Lenders can sell or auction your gold to recover their dues after sending you a certain amount of reminders or notices. So, it is key to plan repayment to ensure you get your gold back.
A gold loan is a convenient credit facility but opts for it only when you are facing a temporary cash-flow problem or a financial emergency. Plan repayment well and remember, the shorter the tenor you choose, the lesser the interest rate you pay. Select a reliable lender after studying all the aspects of a gold loan. For the best gold loan experience, consider Bajaj Finserv. Its gold loan comes with an attractive interest rate, simple eligibility criteria, flexible payment options, and more. You can also benefit from the part release facility, which allows you to withdraw some of your gold ornaments, whenever the need arises. You can apply for the online gold loan from the comfort of your home with minimal documentation or visit your nearest Bajaj Finserv branch.
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