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Before taking a Gold Loan, keep these things in mind

A gold loan is a better option for people facing a financial crisis. It does not require a lot of paperwork. For this, the lender does not check the credit score or evaluate the repayment capacity of the borrower against the loan. Such loans temporarily relieve small business owners from the cash crisis, people who need cash in an emergency can take a gold loan. You can take a gold loan from a bank and a non-banking financial company (NBFC). Here are a few important points that you should keep in mind while taking a gold loan.  

Tax and investment expert Balwant Jain says, “If you need money in an emergency, it is better to take a gold loan than taking a personal loan. Due to the security in gold loans, it is available at a lower interest rate. There is also a possibility of default after taking a loan, so in such a situation, action should be taken by the lender.

Banks vs NBFCs

There is a significant difference between banks and NBFCs. The bank can offer better interest rates whereas, NBFCs can lend a higher amount. For example, NBFCs mainly loan against gold, they can give loans quickly and immediately. Not all bank branches can have this facility. Balwant Jain says, “Before taking a loan, check three to four places where you can get a loan at a lower interest, you will be benefited by this.”

Lenders do not accept gold bars

Lenders accept a minimum of 18-carat purity. Most lenders cannot consider gold below this purity. However, you can pledge jewellery and gold coins. In the case of coins, the lender can ask for higher purity and a weight restriction. Many people do not accept coins above 50 grams.

Repayment

There are many repayment options, you can choose any of them. You can pay in equal monthly instalments (EMIs), or you can pay interest only during the loan term and finally the lump sum principal payment. In bullet repayment, banks charge interest on a monthly basis. It is suitable for a short tenure of six months to one year. In this type of gold loan, you do not need EMI. Tax and investment expert Balwant Jain says, make sure to know the prepayment before taking a gold loan. Does the bank allow you prepayment or not. If it gives and once you have collected more amount and you want to repay the loan, so you should confirm the charge.

Payment default

If you are unable to repay the loan on time, the lender has the right to sell your gold. Also, if the price of gold falls, the lender may ask you to pledge additional gold.

 

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