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| August 22, 2022

Choosing the Right Tenure for Your Gold Loan

Buying gold as an investment is quite popular in India, which has helped the country become the second-largest consumer of gold in the world. As an investment, gold offers buyers a number of advantages. For example, the metal provides a hedge against inflation, is highly liquid, and even helps in diversifying the investment portfolio. One of the best advantages of gold is that it enables people to avail financial support in an emergency through a gold loan. Today, you can also apply online for a gold loan, which has helped this particular financial product even more popular than before.

The gold loan eligibility is generally very simple and involves minimal documentation. However, there are still many factors that one must consider before opting for a gold loan (per gram). Muthoot Finance is India’s No. 1 gold loan provider, with an expansive financial services portfolio, and offers a variety of gold loan offers that you can opt for based on your requirements.

Factors to Consider Before You Apply Online for a Gold Loan

Generally, gold loan eligibility only has basic criteria that must be met by the applicant, like being above 18 years of age and being an Indian citizen.

The maximum amount that a person may borrow as a gold loan depends not on an applicant’s eligibility, but on the purity and weight of the gold they are pledging and on the prevalent rate of gold at the time.

This mainly leaves the gold loan interest rate and the tenure to be selected to be the main factors that an applicant must duly consider. Choosing the right interest rate is all about putting in due research to find offers with the best rates. Selecting a gold loan tenure on the other hand may end up being a little more complicated than this.

The Importance of Choosing the Right Gold Loan Tenure

Buying gold as an investment brings certain protection with it, as you have the option to pledge the gold in case of an emergency where you require funds urgently. However, if one does not choose the right gold loan tenure, they stand the risk to lose their gold if they fail to repay the loan.

The maximum tenure for a gold loan may vary from lender to lender and from offer to offer and is an important factor that not only affects the EMI you have to pay (in case you choose an EMI repayment plan) but also affects the interest rate you are offered. Basically, if you choose an EMI plan gold loan, a longer tenure translates into smaller EMIs, but a higher amount that is paid back as interest. If you choose a bulk repayment plan, a longer tenure offers more time to arrange the funds to pay off the loan, but also, higher interest paid. A longer tenure may also attract a higher gold loan interest rate. That is why due thought and research must be put into choosing the right tenure for your gold loan.

Factors You Should Consider

Irrespective of whether you choose an EMI repayment plan or a bulk repayment plan for your gold loan, here are some factors that you must keep in mind to select the right tenure:

  • Your Monthly Budget:

    List down your monthly expenses and compare them with your income. This will give you an approximate residual income. Account for unexpected expenses and you should then have an idea about how much you can afford to pay as EMI or put aside for the bulk repayment of the loan, without it becoming a burden.

  • Financial Prospects in the Coming Future:

    If there are any expected changes in your financial prospects, whether they result in an increased income, like an upcoming salary hike, or in increased expenses, like some other regular payment due to start, in the coming future, you need to factor them in your calculations of an affordable EMI amount.

  • Existing Liabilities:

    Any existing loan repayments, credit card bills, etc. must be considered as well, so you can choose a gold loan tenure, while also balancing your other obligations.

  • Calculate the Applicable Interest:

    It is known that a longer tenure means more interest and a shorter tenure means lower interest. But you should calculate the actual interest you will have to pay, based on different tenure options to decide what amount of interest you will be comfortable paying.

Use a Gold Loan Calculator to Choose the Right Tenure

It is easy to see that there are numerous factors to be considered and numerous calculations to be done when it comes to choosing a suitable tenure for your gold loan. To make things a little easier, you can skip the maths and use an online gold loan calculator to enter the loan amount and interest rate, and use various tenure options, with which the calculator will provide you with the tentative EMI and interest that you may have to pay for different tenure options.

Muthoot Finance is the most preferred destination for gold loans in India. At Muthoot Finance, gold loans are offered at a per gram calculation of loan amount eligibility, based on the gold rate on the day of application. However, you can choose from a range of schemes and offers to find one that suits your requirements perfectly. You can also get the maximum gold loan tenure options and attractive rates of interest at Muthoot Finance.

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