Gold Loan: Are you going for gold loan, keep these things in mind
Gold is such a metal, which has always had its own importance all over the world. The hobby of wearing its jewellery was from common women to kings. But, its most important role was in the monetary system.
Even today, the economic strength of a country is judged by how much gold reserves it has. Sometimes governments also take loans by mortgaging gold. Common people also often take gold loans.
In such a situation, we are telling you how to take a gold loan, from where to take it and what things should be kept in mind while taking a gold loan.
For what purposes should the loan be taken?
You can take gold for works like children’s education, marriage or medical expenses in an emergency. It is considered safer than other loans. But, taking a gold loan is right only when money is needed for a short time.
The risks involved in using a gold loan for big expenses like buying a house or land should be well considered beforehand.
Should you take a loan from a bank or an NBFC?
This thing depends on your convenience. Gold loan is available at a low interest rate in a bank. On the other hand, non-banking finance companies (NBFC) charge more interest, but also give a higher loan amount.
The main business of NBFC is to give loans in exchange of gold, so gold loan gets approved quickly there. However, before taking a loan, you should find out the interest rate of different banks and NBFCs.
The good thing about gold loan is that it is cheaper than unsecured loans like personal loan, property loan, corporate loan.
Also pay attention to the extra charges
Like other common loans, gold loan also has a processing fee, which varies according to banks and NBFCs. Some financial institutions also give concessions in this. GST is also levied on processing fees.
Some banks and financial institutions also charge valuation fees, which starts from Rs 250. There are also some other expenses like service charge, SMS charge and secured custody fee.
Which option to choose in repayment?
Loan giving institutions give you many options to repay the loan amount and interest. If you are employed and you get money every month, then you can make payment in EMI. You also have the option of paying interest along with the lump sum principal payment.
Banks usually give gold loans for 3 months to 3 years. It depends on you for how long you need the loan or in how much time you can repay it.
How to get a loan against gold?
The first condition of taking a loan against gold is that the gold you are pledging should be at least 18 carat pure. Banks or NBFCs give loans only against jewellery and gold coins. You cannot pledge gold coins weighing more than 50 grams. Financial institutions do not pledge gold bars either.
What if you default on the loan?
The general rule of loan applies here too, if you are unable to repay the loan on time, then the financial institution has the right to sell your gold. Also, if the price of gold falls, you may be asked to pledge additional gold.
