Key Aspects You Should Know About Loan Against Gold Before Going For It

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Gold loans have been a ubiquitous thing in the Indian markets and can be dated back to olden days. They are supe accessible, and have various benefits like easy retrieval and instant cash.

In recent years the majority of the Indian non-banking financial institutions offer gold loans. As the name suggests, Muthoot FinCorp loan against gold is the loan you physically pledge your gold in exchange for money. The gold can be in the form of jewels, coins, etc. Various NBFC’s provide gold loans in both rural and urban areas. 

However, gold is a costly investment, and getting a loan against it requires many things you need to keep in mind.

Six key aspects you must know before availing of a Loan Against Gold

Here are a few things to know:

 1. The type of gold that can be pledged 

The majority of the gold lenders ask for pure gold. The higher the gold’s purity, the higher the amount of money you’ll get. The minimum purity of your gold item must be 18 carats. 

When you are pledging your gold for the loan, the lender will not consider the gems, the stones, diamonds, etc., and some may not provide loans against gold bars.

If you are giving coins against the loan, the loan provider will only accept the coins with a purity of 99.99% and weigh up to 50 grams.  

 2. Rate of interest 

Even though gold loans are cheaper than personal loans, their interest rate varies. It is better to use a gold loan interest calculator and cross-check the interest rates before finalizing the loan provider.

Further, while selecting a lender for availing the gold loan, make sure that the person you are taking the loan from isn’t a scammer and provides you with the best deal available in the market.

 3. Loan amount 

You will never get a loan against 100% value of the gold. Loan against gold can be as low as 60% and can go high as 85% to 90%. But the rate is entirely personal and depends upon the institution that is lending and the company’s gold loan policies.

The gold loan calculator considers either the gold price in the last two weeks or the gold price on the same day.

 4. Credibility of the lender 

Credibility is the most critical factor for borrowing a loan against gold items. Before you finalize the lender, make sure to check for their authenticity, reputation in the market, and lender history. 

Ensure that you have read the fine print and the terms and conditions of the company you are taking the loan from. 

 5. Repayment options 

The NBFCs that offer gold loans provide easy and comfortable repayment options. The two main repayment options are EMIs and bullet payment.

The lender will deduct the interest part upfront in the bullet payment method while giving you the loan amount. For example, if you are taking a loan of Rs.1,00,000, the interest charges will be Rs.10,000. Hence, the lender will provide you with Rs. 90,000. But in the end, the customer will have to pay back the entire Rs.1,00,000 to the lender. 

The lenders also use a widespread option known as EMI (equated monthly instalments) to repay the loan during the tenure. According to this method, you have to pay fixed installments at the end of the specified period. 

 6. Hidden costs and fees 

While the hidden costs and fees depend upon the lender, many NBFCs charge around 1% of the loan amount as the processing fees.  

So, in this case, you must have to confirm this with the selected NBFC before you can opt for the loan. 

Bottom Line

In a nutshell, a loan against gold is one of the easiest and fastest ways to get urgent cash to meet unforeseen contingencies. As stated above, please read the terms and conditions thoroughly before applying for a gold loan with a particular lender. However, it comes with its cons if not taken care of properly.

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