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GOLD AS COLLATERAL - SEVEN TIPS TO ASSIST YOU
Gold loans have become one of the most preferred ways to acquire a loan for fulfilling your financial needs. They are quick to get, easy to avail, and are secured since they are backed by your asset i.e. gold. Here are some recommended loan tips that you can follow while opting for a gold loan: -
1. Loan Amounts
One of the first questions that everyone has is – “how to get a gold loan?” The loan amount is directly linked with the valuation of the amount of gold deposited as collateral. The Loan-To-Value ratio for gold loans is 75% as per the RBI guidelines for gold loans. However, in certain gold loan schemes, no cap is placed on the loan amount. This means you can easily get a higher loan amount using your gold as collateral.
In comparison to other loans available in the market, gold loans have the lowest processing fees. Some lenders may charge you as low as 1% of the loan amount as the processing fee for the loan. This is the reason why gold loan schemes are quite popular among people looking for a loan.
3. Interest Rates
Interest rates completely depend on the amount of loan given against the gold. If the loan amount is high, then the risk factor is also considered to be high by the lender. As a result, the interest rates might also vary. However, since gold loans are backed by collateral i.e. gold, the interest rates are tangibly more competitive in comparison to unsecured loans.
4. Loan Disbursal Time
The reason why most people prefer gold loans is that they have the fastest disbursal process. These gold loans require minimum documentation in comparison to digital loans.
5. Loan Tenure And Repayment Mode
Lenders these days provide multiple options to pay back the loan amount. You can either pay the interest upfront and the principal amount at the end of the tenure or pay the interest along with the principal at the end. We would suggest that you pick an option that suits you best. For example, if you are a salaried employee, then you should choose the EMI option that makes it easier for you to pay back the loan amount. On the other hand, if you are self-employed, then perhaps EMI might not be the best option since there is no fixed monthly income.
6. Gold’s Purity And Valuation
The quality of the gold being pledged for a gold loan determines the amount of the loan. While most lenders have in-house valuation processes, some might use third-party evaluators as well. You can pledge gold coins, jewellery and gold ornaments when seeking a gold loan.
7. Sovereign Gold Bonds
A loan against sovereign gold bonds is issued by the Reserve Bank of India. Instead of holding physical gold, investors can pay the price in cash. Hence, they can redeem it in cash at the time of maturity. The best part about sovereign gold bonds is that the Government of India offers a fixed interest rate on these investments.
All said and done, always compare the different gold loans on offer before pledging your gold as collateral for the same. Muthoot Finance offers an array of gold loan schemes with simplified terms and conditions, easy documentation, quick disbursal, and the lowest gold loan interest rates. Visit your nearest Muthoot Finance branch to know more.
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