Getting funds from external sources is not a complicated thing these days, but managing the debt can be back-breaking. Since the Great Recession (2008), the norms, rules and regulations all over the world have changed drastically. It was a lack of proper supervision and mismanagement of debt that paved the way towards recession.
The financial institutions (banks and non-banking financial companies) have introduced ways to help the borrower to avoid any such situation that could lead to a default. A Gold Loan is a secured loan that comes with several options of repayment for the individual or entity.
It is a credit granted against gold as collateral, and this is why it is also known as a loan against gold. The paperwork and documents required are minimal, and the process is simplified for the comfort and convenience of the borrower. The AU Small Finance Bank Gold Loan is within easy reach of the individuals and entity. The disbursal time is meagre, and this credit facility can be availed of instantly by the individual and entities.
The repayment options offered by the lending institution to the borrowing individual or entity are as follows:
Equated monthly instalments (EMI)-The Equated Monthly Instalments are a fixed amount paid by the individuals or entities to the lender at a specified date over the tenure that has been agreed upon at the time of signing the loan contract.
The Equated Monthly Instalments (EMIs) are calculated based on the principal amount of the Gold Loan Interest Rates levied by the lender per annum and the tenure of the loan. The instalment method makes it easier for the borrower to repay the amount without feeling the burden on their shoulders.
Make partial payments- This type of repayment schedule allows the borrowing individuals or entities to pay some part of the total loan amount right away. If the borrower does this, then they will feel more convenient while paying the principal balance amount. It brings down the amount of interest to be paid by them as the principal amount gets reduced. This method is also known as part prepayment.
Interest as EMI and principal amount in a lump sum- The borrowing individuals or entities have the option to repay the interest as per the agreed Equated Monthly Instalments schedule. At the same time, the principal amount can be paid in full at the end of the tenure. Very few financial institutions (banks and non-banking financial companies) provide this facility.
Prepayment/foreclosure- A prepayment (also known as foreclosure/ preclosure) is an option wherein if the borrowing individual or entity has a surplus, then they can pay off the entire amount of loan immediately irrespective of the repayment schedule fixed and mentioned in the agreement. The financial institution (banks and non-banking financial companies) charges nominal fees for this method to cover up the lost interest revenue.
The method discussed before is open for all the individuals and entities who want a gold loan. The Equated Monthly Instalment is generally preferred as it is more common amongst the borrower, and it is fixed at the time of finalising the terms of the loan. The borrower can use the gold loan calculator to find the estimated monthly instalments. This will help them to understand their liabilities better.
Repayment is as crucial as the other requirements of the lending institution. Though for a gold loan, not much is needed to be done. There are certain relative things that have to be kept in focus. The borrowers will benefit from the options available, and knowing these can be a contributing factor for making a better, well-informed and balanced decision.
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