It takes efforts to maintain a particular lifestyle considering the current rate of inflation. At such times, there often come instances when you need financial support which cannot be provided by your income. Whether it is sending your child for higher education or simply paying unplanned building maintenance, having the right financial aid at the right time means a lot. Thanks to easy accessibility to loans, you can get sufficient funding on time.
Although there are several types of loan that you can obtain for your needs, one of the quickest among them is Gold Loan. You can avail this loan by providing the gold you own as collateral. Banks or financial institutions considers gold loan as a secured loan product so they give quick approval to the applications. Along with easy accessibility, here are the things that you should consider before applying for gold loan.
Gold Loan Interest Rates
Being a secured loan, financial institutions offer you a lower interest rate on gold loan than personal loans. Although you can get a gold loan from a bank or non-banking financial companies (NBCs), it is advisable to apply in banks. This is because their interest rates are comparatively lower than NBFCs.
Fluctuating Gold Rates
As you know that gold rates fluctuate regularly, which has a direct influence on the loan amount you are willing to apply. Before applying for a gold loan, you should be aware that lending organizations use different ways to calculate the gold loan amount. For example, some lender use price of gold in the previous two weeks to determine the average value of gold per gram; whereas many others rely on the daily rate of gold to calculate the value of gold. In order to obtain the maximum amount, you compare them both and then apply for the loan.
Gold loans are generally taken for the short term. Therefore, many lenders offer you the tenure of a maximum of two years. So, you need to ensure that you are able to repay the loan on time.
Terms and Conditions
Finance experts always advise the borrowers to understand the terms and conditions of any type of loan before applying for it. It applies to gold loan too. Although the repayment structure of a gold loan is flexible, it may vary lender to lender. Some lenders offer to pay interest through EMIs for the whole tenure and paying the principal amount while closing the loan. On the other hand, many lenders may ask you to pay a portion of principal and interest simultaneously while paying the EMIs.
Checking the Lender
Gold is a valuable asset. Therefore, you must check the credibility of the lender before applying for a loan. You can do some online research and check customer reviews in order to make the final decision.
As mentioned earlier, Gold Loan is one of the quickest ways to get financial assistance. As you provide gold as security, lenders ask you submit minimal documents required for the process. These documents generally include identity proof and address proof.