Gold is not only an ornament for adornment but also one of the most important financial resources to help with emergency in times of uncertainty. You can use your gold as collateral to break borrowing barriers due to your income or poor credit score.
It helps you borrow money and recover your property. The Reserve Bank of India (RBI) has increased the LTV ratio for gold loans from 75% to 90% till April 1, 2021. This helps in getting more value on gold if people apply for gold loan during financial crisis. In this case, if you are planning to take a mortgage loan against gold, you must know these 5 things.
Choice of lender
It is important to check several companies and compare their services and security. This helps to keep your gold safe and is useful for restoring the jewelry. Also, how easily your loan is approved and other services you will require during your loan tenure are important factors to consider before finalizing your loan.
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Gold loan amount
Loan-to-value (LTV) ratio is defined by RBI as 75%. Apart from the LTV ratio, your loan amount depends on the purity and value of your gold; The better the purity of your gold, the more likely you are to get a higher loan amount.
Loan period
The tenure of a gold loan is usually shorter than other types of loans. It is for a short period of time, usually one year to 36 months.
Interest rate
Interest on gold loans can range from 7.40% to 14.50%. It may be more or less depending on the purity of your gold. However it varies for lending institutions or banks
Other charges
The terms and conditions of gold loan often vary from one person to another. Some lenders may accept Equated Monthly Installment (EMI) similar to conventional loan. Others may ask you to pay the interest upfront and the principal later. Many lenders allow you to pay both interest and principal together. Before you sign the loan agreement, it’s a good idea to know in advance about the prepayment fees, processing and other additional costs you may have to pay.
These tips will help you make a wise decision when you choose a gold loan. It is advisable to compare the interest rates of different companies and choose a tenure to repay your loan easily without delay and default.
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