5 Common Mistakes To Avoid While Applying For A Gold Loan

Gold Loan

If you’re in urgent need of fund assistance, then a gold loan is your savior. You can easily apply for a gold loan at any bank or NBFC (Non-Banking Financial Companies) that provides the facility of a gold loan.

Most gold loans have low interest rates due to the fact that most people prefer it. The interest rate of this type of loan is directly dependent on the total principal amount, and the EMI amount is dependent upon the interest rate of the company and the total time duration of repayment. Most companies provide gold loans without any income certificate. However, borrowers have to repay the amount borrowed along with the interest rate and within the loan tenure. Therefore, it’s essential to repay your loan amount on time. Missing even a single installment will negatively affect your credit score.

However, borrowers have to repay the amount borrowed along with the interest rate and within the loan tenure. Therefore, it’s essential to repay your loan amount on time. Missing even a single installment will negatively affect your credit score.

The entire loan process is speedy and hassle-free. A lot of banks like Bank of Baroda gold loan, Axis Bank, ICICI Bank, etc., will approve your gold loan within 1-2 hours.

Benefits of Gold Loan

  1. Fast processing:- Processing time taken for a gold loan is speedy and hassle-free. Banks usually disburse the loan amount in a few hours, so you don’t have to wait for days and days to get funds from a gold loan.
  2. Low-interest rate:- The interest rate charged for a gold loan per gram is very low as it is an unsecured loan. The Gold loan interest rate varies between 7% to 18%.
     
  3. No processing fee:- Banks do not charge a processing rate for these kinds of loans due to the fact they will be processed right away and are secured via means of collateral.
  4. Income proof: Unlike any other loan, you don’t have to submit your income proof to get your application approved.
  5. Credit Score:- You can apply for a gold loan even if you have a bad credit score. So you don’t have to necessarily maintain a decent credit score to get your loan processed.

There also are matters which you have to be aware of before applying for a gold loan. We’ve referred to a few common mistakes you could avoid while applying for a gold loan.

1. Credibility:

A lot of banks and NBFCs provide the facility of gold loans. Therefore it’s essential to check the bank’s credibility before applying for a gold loan. A lot of individuals prefer taking a gold loan from neighborhood jewelers. But they forget that keeping your gold at an average jewelry shop will possess a lot of risks. They can replace your diamonds and stones with fake ones. So it’s essential to choose a credible lender. It is advisable to take a gold loan from an RBI-regulated Bank.

2. Market Options:

Many individuals apply for gold loans at their bank because they don’t have any other better option. So it’s advisable to compare all the options available in the market. A lot of factors like interest rate, LTV rate, and eligibility criteria differ from one bank to another. So you can compare these factors and then choose a bank that will seem like an ideal bank for your budget.

3. Repayment Option:

Banks give customers the flexibility to choose repayment tenure and structure according to their income. So you can calculate your income and expenses beforehand so that you can decide on a loan repayment structure accordingly. There are many structures like regular EMIs, partial payment, interest now as EMI, Bullet repayment, or prepayment that can be used to repay the loan amount. You can research more about the repayment options available in the market and choose your ideal one.

4. Charges:

A lot of financial institutions hide the truth behind the charges that have to be paid by the borrower in their’ terms and condition’ section. There are a lot of hidden charges that customers should be aware of. So it’s advisable to choose a credible and trustworthy bank that will be completely transparent about the charges.

5. LTV Rate:

A lot of individuals are not aware of the LTV ratio calculation. It is the percentage amount that you will get from your gold value. It usually varies between 75% to 85%. But during this pandemic, the government has increased the LTV rate to 90%, but the higher your LTV rate is, the more risk will be associated with it. So you can research more about how banks calculate the entire LTV ratio to prevent any mistakes in the future.

Conclusion:-

Applying for a gold loan may seem like a cakewalk, but it is a huge decision. So please keep all the factors that will affect your gold loan in mind, and compare them to choose your ideal gold loan option.