A gold loan is a secured loan offered by financial institutions to individuals from all walks of the life. It offers the best way to access instant funds and cover expenses, such as medical emergency education, travel, home renovation, car repair, debt consolidation, working capital needs etc. Lenders do not restrict the end-use of the sanctioned loan amount.
The loan amount is determined based on the market value of your gold items. High-value gold fetches a higher loan amount. Since it is a secured loan, most lenders do not consider credit scores to approve your application.
Here are the top things to remember before applying for a gold loan:
- Loan amount
As mentioned earlier, the loan amount depends on the market value of the gold you pledge as collateral. You can secure up to 75% of your gold’s value as a loan from Indian NBFCs such as Muthoot FinCorp. So, if you wish to secure a gold loan on a per gram basis and that at a lower interest rate, it would be wise to opt for a loan amount based on your needs.
- Interest rates
A gold loan interest rate is determined based on factors such as loan amount, tenure, quality of your gold ornament, and current financial obligations. Generally, the gold loan interest rate ranges between 9.5% to 25%. So, while applying for a gold loan, make sure to compare interest rates and choose one that best serves your needs.
- Processing fees
Besides the interest rate, the processing fee is another cost associated with a gold loan. To obtain a gold loan, you will need to pay a processing fee that generally ranges between 1% to 2% of the total amount. So, before applying for a gold loan, check your lender’s processing fees
- Loan tenure
Gold loans are short-term loans, which means that you need to repay within 1 week to 3 years. Although you have the option to choose a longer loan tenure, you must make a decision based on your needs. If you have enough funds in your account, it is advisable to opt for a shorter loan tenure. This way, you can save interest.
- Lender’s credibility
Another thing you must be mindful of while applying for a gold loan per gram is the lender’s credibility. You must find a lender that has been in the business for a long time and has a great reputation in the market. You can check your lender’s credibility by reading the online reviews and testimonials, which offer great insight into their services. Finding a credible lender does not only help in getting better rates but ensures that your gold is safe with your lender.
In short
A gold loan is an easy and quick way to access funds to meet your financial requirements. You can secure up to 75% of your gold’s market value as a loan. The best part is that there is minimum documentation and eligibility requirement to obtain a gold loan.
