5 Factors to Consider When Taking a Gold Loan

The gold loan has remained a popular borrowing option for decades, especially for those in the immediate requirement of finance within a short period of time. The biggest advantage being it’s an asset-backed loan requiring no strong credit score for approval. This makes it the first choice amongst those with low or no credit profile. Although gold loans are one of the most attractive options available it has certain implications, which is why you must be careful when applying for a gold loan. Here are some of the factors that must be considered when availing a gold loan-    

The price of gold keeps fluctuating. Therefore the loan value is calculated in a different manner when obtaining a gold loan. While some take the daily route for valuing gold, others compare the gold prices of the previous two weeks and then derive an average for determining the rate of the gold loan per gram. Carefully considering the plan can fetch you higher value to your gold.         

2)Interest Rate                   

The interest rate charged on the gold loan can differ, depending on the source it is obtained from. The same is going to be higher when availed from an NBFC.  At the very onset, you must find out more about all the sources of finance before opting for a gold loan. Also, other charges must be taken into consideration such as processing fees and prepayment fees.

How pure your gold is remains a crucial factor in determining your loan amount. Most often any form of gold jewelry, ornament or coins can be presented as collateral. Either    house valuation is conducted by lenders to assess gold value or third party evaluators are hired to conclude the total principal amount to sanction.    

The structure of repayment usually differs from lender to lender. There are some lenders who would ask for repayment only when the tenure has ended. Then there are others who would want you to do the repayment in EMI mode under which you would have to pay both the interest amount and the principal amount across the loan tenure.  Therefore, it’s advisable to understand the terms carefully before availing a gold loan.

No paperwork or evidence is required by a local vendor in case of gold loans. The security quotient of the lender is enhanced since he has the gold just in case the person doesn’t pay back the amount. The person availing the gold loan, however, must perform a background check of the lender to safeguard his assets. Choosing a reputed company acts as a guarantee that your gold is in safe hands.      

Just like you search “ currency exchange near me” and choose the best dealer, you must opt for most trustworthy sources and choose the best when availing gold loan as well.

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