Anyone who has even 10 grams of gold can opt for a gold loan in times of monetary needs. Apart from banks and NBFCs, many jewellers also provide a gold loan, but their interest rates are not as per the market, and they might have their criteria and conditions. The gold loan per gram rate is around Rs. 4.100 per gram in the present market. So if you are pledging 20 grams of gold for acquiring a gold loan, then the bank will be able to provide you funds for Rs. 65,000, taking into consideration the quality of the gold, the LTV ratio and the margin for the fluctuations in the gold loan per gram rate based on market trends.
But there is a downside to the loans against gold, and that is, if you are unable to repay the loan amount within the specified loan tenure, then the lender has the right to seize the gold and use it to get the remaining loan amount by auctioning it at the required price. Any recovery made more than the outstanding amount will be returned to the borrower, but that is a significant loss to the borrower as the making charges and additional tax rates are excluded in this deal. The bank can impose penalties on the borrower in this case, and it significantly affects his credit score as well.
Therefore, it is advisable to do your homework and thorough evaluation before going to any bank or NBFC to apply for a gold loan. You need to keep the following points in mind while opting for a loan against gold -
Know the worth of your gold ornaments: First, check the purity of your gold (should be more than 18 carats). Then, based on recent trends, estimate its market value. Only after knowing the actual value of your gold articles can you negotiate appropriately with the lender to give the best deal for the pledged gold.
Ensure that the lender is credible: It is better to do a background check of the lender and know about the safety protocols adopted by them to ensure the safety of the gold that will be kept with them. Choosing a respected Bank or NBFC is always a wise decision as it assures the borrower that his/her gold will be kept safe and secure until the loan tenure.
Try to understand the repayment strategy: There are various options to repay the amount when it comes to gold loans. Applicants can opt for the conventional method of monthly instalments comprising interest plus principal amount or opt for the bullet repayment technique. There is also the option of repaying the loan interest as instalments each month and the principal amount as a lump sum at the time of loan maturity. It is imperative to consider your finances and stability while opting for the best repayment technique.
IDFC First Bank is a private sector bank that is a trustworthy and credible source for gold loans. The interest rate for IDFC First Bank Gold Loan ranges from 10.50% to 12.50%. Applicants have the option of applying online directly on their website and getting the loan approval and disbursal within one hour. The IDFC First Bank Gold Loan tenure can be a maximum of 24 months and can be extended if you have an existing account with the bank.
Conclusion
Hence it is best always to be alert and wise while negotiating with the lender to get the maximum loan amount and the best gold loan interest rate for your pledged gold.
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