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Important factors to consider before going for a gold loan
Posted on: 05/Jun/2018 1:03:36 PM
Securing immediate funds within a short span of time is possible only through a gold loan, especially when the money need is quite higher when compared to other personal loan limitations. In India the gold savings are the major investment for any family in any forms of society and environment. So the flow of gold with financing loans are very common and people tend to save gold not only for beautification purpose but importantly for the emergency financial requirements.
The actual process of monetizing the idle gold for financial requirement is very easy but there are certain pre-required factors to check on before opting for gold loan. Lets take a look at these primary requirements to consider before taking a gold loan.
Loan Amount
The equation of the gold you deposit as collateral will determine the total amount of money taken as a loan. So the knowledge about the Reserve Bank of India guidelines in the money lending process through gold is very important before considering the gold loan. According to the RBI rules the loan-to-value ratio (LTV) for gold loans is 75% of the gold pawned. The contemporary lenders are ready to sanction loans up to Rs 10 crore maximum, Rs 1000 as the basic lending category. Depending on certain factors such as combined collateral lending and proof of verification some private bodies provide higher amount of loan depending on each individual customers.
Interest Rates
It varies with each lenders available in all categories such as private gold loan lenders, banks and other governmental financial agents. Also the loan amount, LTV ratio, loan tenure and risk assessment determines the interest of loan for the particular gold loan transaction.
Higher the LTV ratio higher is the risk for the lender to sanction the loan and so the interest amount will be higher for such big ratios. At present the interest rate for gold loans can fall anywhere between the ranges of 9.45% P.A to 26% P.A depending on the above mentioned factors. So consider all these limitations before taking a step ahead in terms of gold loan.
Analyze with other forms of personal, collateral and other loan forms to calculate the total money expenditure to resolve the entire loan and then take a firm decision about the category in which you can travel along for your money needs.
Processing Charges
The main advantage of gold loan is the processing charges that is lower than other loan options. At present most of the lenders charge 1% or lower of the total loan amount as the processing fee in gold loan options. Most of the gold loan lenders will not collect extra charges for pre-payment of the loans, somewhat lesser than 1% will be charged by some rare lenders.
Disbursal time
Loan disbursal time is the most important factor when planning to acquire immediate finance for your urgent requirements. Gold loans act as a borrowing method with relatable collateral as security. For a worst case scenario even if the borrower disappeared from the face of the earth abruptly after the loan sanction the lender can get his money back easily by selling the property. So the time required to sanction a gold loan is very low when compared to other forms of loans. So o the gold loan is considered as a big investment strategy in India for the quick money it gathers during the times of emergency.
Tenure and repayment
Tenure fir gold loans are always flexible when compared to other options, starting from seven days minimum to three years maximum. Many alternate repayment options are available in gold loan to the usual EMI method. Early re-payment or the repaying the principal or interest components in the end of the tenure can be done through gold loans.
Purity of the gold
Any kind of ornaments and gold coins can be pledged for the gold loan. Jewels such as necklace, rings, bracelets and chains are kept as collateral for acquiring a loan. Lenders most of the times evaluate gold with the in house purity checking facilities and then decide the total principal amount to sanction. Sometimes they go for a third party purity check facility if the option is not available in their own premises.
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