Do You Want The Lowest Gold Loan Interest Rate? Don’t Forget About These Factors before Submitting an Application

A gold loan has continued to be one of the most popular types of short-term borrowing over the years, especially among people who are in urgent need of money. Due to the fact that they require very little paperwork, offer a variety of flexible repayment options, and provide funds very quickly, gold loans are highly recommended for people who need money immediately. Also, because a gold loan is secured by the borrower’s gold, best gold loan bank frequently decides whether or not to approve the loan without taking the applicant’s credit score into account. This implies that anyone can get a gold loan regardless of their credit score.

However, you should carefully consider the following six crucial factors before applying for a loan to buy gold:

Gold loan’s amount

Gold loans can be regarded as secured loans by nature because they are made against gold that is kept as collateral. The value of the gold that you pledge to the lender as collateral largely determines the amount of the loan that the best gold loan bank is willing to offer you. This is in addition to the other factors, like the LTV ratio and your repayment capacity, that are taken into account. Borrowers do not receive the full value of their gold as a loan because the Reserve Bank of India (RBI) has imposed a maximum loan-to-value (LTV) ratio of 75% for gold loans offered by best gold loan bank and NBFCs. Financial institutions currently offer gold loans, typically in amounts ranging from Rs 5,000 to Rs 10 crore.

The applicable interest rates

The lowest gold loan interest rate is decided after the lender assesses the risk involved and takes into account variables like the LTV ratio, loan tenure, loan amount, and others. For instance, lenders typically request a higher interest rate because a higher LTV ratio exposes them to a higher risk. This is done to make up for the higher risk involved with loans of this nature. It would be wise to compare the interest rates provided by various lenders before choosing one in particular because the lowest gold loan interest rate typically starts at around 7-8% however the range goes as high as 29% per year. If you want to compare different lenders and choose the one that best suits your needs in terms of loan eligibility and financial requirements, you might want to consider visiting online financial marketplaces.

Charges for processing

Processing charges for gold loans can be either a flat rate or a portion of the total loan amount. Most of the time, it is between 0% and 2% of the total loan amount, but some lenders may impose a flat fee as low as Rs. 10 instead. Make sure you consider the processing fee that the lender will charge before submitting an application for a gold loan. Be sure to take this fee into account because it can significantly affect the overall cost of the loan, especially when it comes to large-ticket loans.

Loan duration

With typical repayment terms ranging from one week to three years, gold loans are regarded as short-term loans. It’s crucial to consider your ability to pay when choosing the length of your loan and to select a term with an interest payment that fits within your budget each month. To get a precise estimate of the EMI you can expect to pay based on the loan amount, lowest gold loan interest rate, and term that you choose, it is advisable to use an online EMI calculator. The amount of the EMI will decrease as the tenure is extended and vice versa.

Alternative non EMI payment options

In addition to the standard EMI option, where the borrower is responsible for repaying both the interest and principal component of the loan, some lenders, including the best gold loan bank, offer additional repayment options for gold loan borrowers. The option for borrowers to choose a customised repayment plan allows them to pay only the interest portion of the loan each month and postpone paying the principal portion of the loan until the loan’s maturity date. 

When you get the loan approved, some creditors will also let you pay back the interest portion of the loan, while others will let you pay back the principal portion of the loan at the end of the term. The option of “bullet repayment,” which requires repayment of both the principal and interest components of the loan at the end of the term, is also available to borrowers. Therefore, the borrower should choose the option that best suits their cash flows from these available options. For example, in the current COVID 19 induced lockdown scenario, those with restricted cash flows will find that the non-EMI options, in particular the bullet repayment option, are appropriate for their situation. On the other hand, people with reasonably steady incomes have the option of selecting the standard EMI option.

Prepayment fees

The majority of lenders typically do not charge any fees if the borrower chooses to pay off their gold loan early. Some lenders may charge prepayment penalties of up to 2.25 percent of the total balance still owed on the loan. Make sure you compare the prepayment fees before choosing a lender because the main reason for prepayment is to reduce the overall cost of the loan’s interest. Prepayment’s main goal is to reduce the total amount of interest paid on the loan. When you pay off your loan early, you should make sure that the overall interest costs you will save will far outweigh any possible prepayment penalties.

The quality and monetary value of gold pledged

The type and quality of the gold that is pledged also has a big impact on how much of a gold loan can be obtained. Any kind of gold jewellery, ornament, or coin can typically be used as collateral, though each lender will have different requirements. Best gold loan bank may also use an internal valuation system or outside valuators to assess and evaluate the gold that has been pledged. Based on the evaluation of the gold that has been pledged, the sanctioned loan amount is determined.

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