Gold is a valuable commodity. It is not just a decorative item but also comes handy to meet the unexpected financial issues that may crop up anytime. Taking a loan on gold is easy as compared to the other loans. Thus, it is becoming a popular option among people. One can avail loans on gold from banks, NBFCs and even private vendors. However, there are certain precautions that must be taken before applying for a gold loan. Read on to know about them:
Check the lender’s credibility
Before you apply for a gold loan, it is imperative to check the reputation and credibility of the lender. When you take a gold loan, the gold remains with the lender until the time you fully pay back the amount. This can get risky, especially if the lender has a dubious reputation. Therefore research the market and only lend your gold to reputed lenders, banks or NBFCs. It is best to go with known lenders such as UNIMONI, which is one of the best gold loan companies in India.
Be aware about the minimum purity criteria
There is a minimum purity criteria that needs to be met for the gold to qualify for a loan. The purity of gold ornaments or objects ranges from 18 to 22 carats. So keep in mind that it is only the above-mentioned purity that will be counted by the lenders.
Compare the options
It is imperative to do your homework. There are a number of banks and private vendors offering loans on gold. Do not take the first gold loan offer that comes your way. Instead, do some market research and check out the various interests on the loans being offered by the banks or vendors. Make a list of the offers and zero down on the one that you find the most lucrative. Try to get a creditor who is not just reputable but would also give you the loan at a much affordable rate of interest. Another option you can consider is cash against gold. Gold Loan lends 75% at LTV whereas You can also avail Cash for Gold which would be 99% around the actual value.
Understand the repayment structure
Before applying for a gold loan it is important to understand the repayment structure of each bank, NBFC or vendor. The flexible repayment structure makes the gold loan a much viable offer for people as compared to other loans. However, the repayment structure of each bank or NBFC is different. Some banks or lenders provide the option of repaying the loan in the form of EMI. Here, both the principal as well as the interest are paid back during the tenure of the loan. However, some lenders give the option of paying the principal when the tenure of the loan ends.
Gold loans are of short-term so it is important that you avail these only if you are able to repay the entire amount within the stipulated time period. In most of the cases, the maximum time period for which a gold loan is given is around 12 months. So, only avail gold loan in urgent necessity. Also, make sure that you pay it back in time. Else, your gold will become the property of the lender.
So, if you are planning to avail a gold loan, do keep these points in mind as it would make the entire process smooth and easy.