If you are all set to take a gold loan, then as a customer, you need to be attentive towards these five aspects of getting approval for a gold loan.
In India, gold loans are an easy means for acquiring finance because most households invariably possess this precious yellow metal in the form of heirlooms or newly acquired jewels. More so, the popularity of gold loans has been spurring since the last decade. The growth has been especially initiated by NBFCs segments such as Muthoot Gold Loan and Manappuram Gold Loan. Since then, most major Indian banks have been working hard to popularize this loan segment in the Indian finance market.
Here, we have the 5 most essential traits that you need to consider before you plan to apply for a gold loan.
Rationale for the Loan and its Tenure
Gold loans are basically categorized under the class of short term loans with the highest tenure of just a year. Therefore, you should plan to borrow only if you are sure that you can repay the borrowed money within this duration. Otherwise, the lender would auction your gold to ensure repayment. Furthermore, it is not advisable to consider taking a gold loan for risky ventures.
Rates of Interest and Other Related Charges
The interest rates charged on gold loans are basically higher than those levied on any other type of loan, specifically if the loan is taken from an NBFC. At the very onset, you may like to find out more about all other sources of finance for meeting your needs. If you can’t find any, only then should you opt for a gold loan. Also, you need to take the other associated charges into consideration, such as the prepayment fees and processing fees relevant to the same.
Amount of Loan
The highest amount of loan that can be granted to you would differ from one lender to the other. Normally, NBFCs provide a greater amount of loan amount with higher product ranges. But be aware that you would not receive the whole value of gold as loan because the lender would retain a portion. Try to understand the methods of valuing your gold followed by the lender since this would also signify the loan amount that you can take.
Go Through the Terms of Repayment
The structure of repayment would vary from one lender to the other. Some lenders would ask you to repay the principal only when the tenure ends, while other lenders would ask for repayment in the EMI mode where both the principal and the interest amount will have to be repaid across the loan tenure.
Which is More Feasible- A NBFC or a Bank?
Previously, the concept of gold loan was significant to rural areas only, but now this concept has started gaining popularity in urban areas as well. This fact has resulted in an enhanced number of borrowing options for customers. Although borrowers prefer NBFCs for availing gold loans, there are many banks that have initiated to sell this product during the past few years.
The selection process of a NBFC or bank is largely dependent upon your necessities and circumstances. If you prefer a lower rate of interest then go for a bank or a NBFC product that offers low rates. Alternatively, if you are alright with a higher rate and are looking for fast loan disbursals with very little documentation, then choose a NBFC.
So, plan as per your requirements and get the best deal from your lender!