Gold in India is not only considered as an ornament or jewelry, but it is also a reserve for a financial crisis. With Indians increasingly utilizing their gold in their financial emergency, India’s organized gold loan market is estimated to grow much more prominent, about Rs. 3,100 billion by 2020 at a CAGR of 13.5 percent. While gold loans are readily available in the market, it is easy to be indecisive while opting for a gold loan.
Given below are five things that you may not have known about getting a gold loan.
1. Not analyzing the reliability of the lender:
When you take a gold loan, you must give your gold to the lender as collateral for an amount based on its value. As a secured loan, your gold remains with the lender until you have repaid your whole amount. Always check the reliability of the lender and make comparisons between lenders for online gold loan. You can use web services to compare factors like the annual interest rates, tenure, and processing fees.
2. Not checking enough lenders:
Many lenders are happy to give you a gold loan today, and they also have different offers for you. Before finalizing with a lender, it is wise to check with various lenders to know what is best for you and what others are offering. Almost every lender has an exciting offer and attractive gold loan proposals. But you must read through the terms and conditions before opting for one. Check with as many lenders as possible and compare their offers on the annual rate of interest and loan to value ratio.
3. Know the value of your gold:
Gold lenders grant a loan on gold with a purity of 22 karats or above. Also, gold bars above 50gms are not acceptable as collateral by lenders and financial institutions. Gold loan per gram can vary from Rs. 2,777 to Rs. 3,394. If the jewelry you give as collateral has gemstones, then these gemstones’ value is not considered. Thus, it is crucial to know the worth of your gold before applying for a gold loan.
4. Not knowing the loan to value ratio on your gold loan:
While applying for a gold loan, you may get the full value of your gold. As per India’s reserve bank rule, the LTV of your loan cannot exceed 75 percent. Different lenders use different parameters to obtain this ratio.
5. Not able to understand EMI options:
Gold loans are easier to get as they are a type of secured loan, so lenders offer different EMI schemes to their borrowers. There are four types of repayment schemes:
- Regular EMI
- Partial repayment
- Only interest EMI
- Bullet repayment
You can choose the EMI option which suits you the best.
Before applying for a gold loan online, it is essential to know about your lender and its terms and conditions. You can go through the above points and choose the best lender according to your needs.
