In India, the number of applications for loans secured by gold or gold loans has significantly increased in recent years. COVID-19 has further supported this expansion. It is becoming more and more the favored choice for most Indians due to the low-interest rate it carries in comparison to unsecured loans like personal loans.
In general, receiving a gold loan seems like an easy way to get cash, whether you need it for an urgent financial necessity or to cover expenses for a wedding, festival, or travel. With a gold loan, you can earn money off of your gold assets without really selling them. However, many clients choose the wrong gold loan by making a few easy blunders. Here are some frequent blunders to stay away from while applying for a low interest gold loan.
Overlooking the lender’s credibility and background: Due to the fact that you are promising your gold in exchange for a little amount of fast cash, you should proceed with extra caution before submitting the gold loan application. The majority of people make the error of failing to confirm the credibility of the best gold loan bank. As a result, you are in danger more than the lender. Do your research on the lender before applying for a loan because your gold will stay with them until your loan is fully repaid. Only obtaining gold loans from reliable, reputable banks or NBFCs. You should always choose a firm that is governed by the RBI over the one you stumbled into by accident.
Not comparing the different interest rates of lenders: Contrasting the interest rates offered by various lenders for gold loans is strongly discouraged. They might hide the extra costs incurred during the transaction while advertising alluring interest rates. Even if you apply for the low-interest gold loan believing the quoted rate is the final one, the additional fees won’t become apparent until you begin making payments. You can compare interest rates and costs on any of the fintech aggregator websites, but make sure to research hidden fees as well before selecting a lender.
Not doing adequate analysis of alternative lender types: Several banks, fintech, and NBFCs are currently willing to lend you money in exchange for gold, and each of them has a different deal to offer potential borrowers. The majority of banks and NBFCs provide affordable gold loans. To analyze their proposals and compile a list of options based on the gold loan interest rate to loan-to-value ratio, try to get to know as many borrowers as you can. After that, you might be able to choose best gold loan bank that is offering you a reasonable rate.
Quickly accepting the first offer that you get from a lender: As a borrower, you should never accept the first offer that is made to you. The deals you’ll discover will get better as you examine them closer. In fact, the bank will feel compelled to go above and above and negotiate a better deal for you if you present them with this comparative research when you contact them. Find the best gold loan bank that offers a higher loan-to-value (LTV) ratio or a cheaper gold loan interest rate.
Not checking the wide variety of repayment options available: It’s important to assess the several repayment options and pick the one that best suits your requirements. Choose whether you will make one large payment, recurring EMIs, or interest-only installments. When it comes time to pay back the low-interest gold loan, be sure you have the money on hand. Check the amount you could save each month to see if you can afford the EMI payments.
No knowledge of what types of gold are acceptable to lenders as collateral: Keep in mind that only gold that is 22 karats or greater will be accepted as collateral by banks. Therefore, the bank may cut the amount of your gold to fewer grams or reject your loan application altogether if your gold is less pure than this criterion.
If you are promising a diamond necklace with a gold pendant, just the weight and purity of the gold will be taken into account when determining the loan value. Although gold coins are also acceptable, any gold coin weighing more than 50 grams is typically accepted.
Overlooking the finer details: What prerequisites must be met before your bank is allowed to hold the gold and auction it off? Which requirements must be met in order to repay the loan without incurring fees? At least 90% of clients do not read the small-print terms and conditions, which include various clauses relating to the gold loan. You might have to pay a higher interest rate on your gold loan if you do this mistake.
Some gold loans may feature increasing interest rates, which implies that after a set amount of time, the rate may move up to the next slab. Before you sign on the dotted line, carefully review each of these details.
Lack of understanding of the LTV proportion’s importance: The borrower must thoroughly comprehend the LTV (Loan to Value) calculation the bank uses to determine loan eligibility. Banks and NBFCs determine the worth of your gold using information from their central office and then offer you a low-interest gold loan for up to 60% of that sum.
You can be eligible for a loan of up to Rs. 3 lacks if the market value of your gold is, for example, Rs. 5 lakh. You must be fully aware of the gold’s market value before submitting your gold loan application. Describe the benchmark, the price being utilized, and the process used to calculate the current value in detail.
Not reading/checking customer reviews: Although it may initially appear unnecessary, you may encounter numerous challenges during the repayment time, and you will require reliable customer support to calm your worries. That is why it is in your best interests to prioritize the best gold loan bank from whom you obtain the gold loan. They must be ready to help you when it comes to loan repayment or other important matters. Reputable lenders provide excellent post-loan disbursal services as well.