There are various factors that a prospective borrower needs to pay heed to before availing of a gold loan or looking at alternatives available.
The current price of Gold- It is important to consider the market ups and downs when going to mortgage one’s gold articles. Gold prices are dependent on a plethora of market factors like inflation, global demand, market movement, RBI guidelines. therefore, it is feasible to go for a gold loan when the price is the highest.
Source of the loan- While there are both public and private players in this segment, consumers must verify the terms before engaging with any bank or non-banking financial company. Customers can additionally look at the terms on any bank’s website by clicking on Gold Loan Apply Online and going through the various stipulations.
Period of the loan- Gold mortgages are more often than not, shorter tenure loans used to suffice immediate monetary lapses. Customers must be sure to pay back the amount within the timeline to avoid penalties or losing the assets secured in the first place. While most standard schemes permit up to 12 months for repayment, aspirants for longer durations can apply for overdraft features offered by leading providers like the Canara Bank Gold Loan scheme where the time limit is 24 months.
Repayment structure- Firms offer different schedules of repayments. While some uniformly divide the principal over the tenure of the loan, others collect it along with the principal on the maturity of the agreement. Proper research and evaluation of alternatives are warranted to judge the best fit for the borrower.
Interest Rates- This is perhaps the most important factor that plays into how much more one has to pay back over what one has borrowed as principal. Different banks offer different levels of interest and special concessions are given to senior citizens and women entrepreneurs looking to start a business of their own.
Valuation method- The value of gold articles to be mortgaged is determined by the bank through jewelry partners or certificates issued by the same. This is where the concept of a Gold loan per gram comes in. The purity of the gold whether 18kt, 22kt, and 24kt all attract various rates. The purer the gold, the higher its rate per weight, and thus the loan amount against it will be higher as a result. LTV or loan to value proportion is a pertinent factor in gold loans. For example, if the gold mortgage is valued at 1 lakh and the LTV rate is 80%, then the maximum loan amount sanctioned against that security would be 80,000. The higher LTV a bank offers, the better it is for the client.
Other costs- Most banks or NBFCs charge a 1% loan processing fee, which is subtracted from the disbursed amount. There are also other fees that some banks charge and need to be closely examined before proceeding with the application.
Documentation- Gold loans do not require conventional documents like income certificates or credit reports, rather proof of ownership like receipts and jewelry certificates play an important factor in these applications. Without checking the veracity of these papers no firm will give out any money against gold.
Prepayment fees- In case a customer has managed to accumulate the total amount due before the scheduled date of maturity, most banks charge prepayment fees for foreclosure of a loan account.
These cover the essential elements of any loan agreement and stand true for Gold loans in the Indian context.
Conclusion
These basic factors need to be closely examined by the prospective customer while considering a banking partner for their mortgage needs. Most banks have made doorstep and online booking for such loans available which makes the evaluation of these factors extremely simple so that the customer can choose the option that works the best for them giving the highest loan return at the lowest possible interest, and thus providing total value.
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