Finance

5 important things you need to know when taking a gold loan

In India, gold purchases are common across demographics as it is seen as a form of investment apart from having symbolic and cultural value. However, it also serves as a handy asset when you need finances. In these times, when the pandemic is affecting incomes adversely, you can capitalise on the high value of gold, which is currently above Rs. 50,000 per 10g, to get a gold loan.

Thanks to fintech advancements, you can get the best gold loan in India with ease and can even start the process online. Besides the convenience of digital application, an online gold loan from a leading lender may offer other benefits too. As it is a secured loan, you could get a competitive rate and enjoy fast disbursal. However, since you don’t want to lose your gold asset, here are essential pointers to keep in mind when availing of this type of loan.

Understand the charges applicable on gold loan

Processing and valuation fees are common to many lenders, so ensure you know what you need to pay for this upfront. Usually, processing charges amount to 1-2% of the loan amount, and planning for this is essential. It is particularly important to know if you will be charged for part-prepayment or foreclosure of your gold loan as it affects how easily you can become debt-free and reclaim your gold ornaments or coins. In a similar vein, see what the penalty charges are for missing an EMI as well as the penal interest.

Assess repayment plans and tenors

When it comes to loans, planning repayment is the most crucial part of financial management. Usually, lenders offer gold loans for a short tenor of 3-36 months, so choose a lender whose timeline matches your income and needs. In addition, check the various repayment plans you can go for. You may generally come across any of these 3 options.

i) Repayment of the principal only at the end of the tenor and pay the interest every month or quarter.

ii) Paying the loan with regular EMIs, which consist of the principal and interest components.

iii) Pay the interest at the start of your loan tenor and the principal amount at the end of the tenor.

Some lenders may allow you to make cash payments for the interest applicable on your gold loan too.

Know the valuation procedure

A precise appraisal is an indispensable step to getting the finances you need. When you approach a local jeweler, this may not be completely reliable. So, choose a reputed lender who has a carat meter to ensure you get the loan amount you desire based on purity and weight. Also remember that while lenders accept gold jewelry, they only accept gold coins issued by banks, and usually not gold bars. For coins too, you may have to adhere to certain restrictions such as limiting the weight at 50g per applicant. Keep in mind also that when valuing ornaments, lenders will only consider gold and no other precious metals or stones.

Check for the part-release feature

Some lenders offer you a handy part-release facility. In case you need the gold that you have borrowed against, you can withdraw some of it for some time. This can be a great boon for Indian families who may require ornaments for an occasion.

Remember the consequences of non-payment 

While gold loans have better interest rates as compared to collateral-free options like a personal loan, remember that defaulting during repayment has consequences. The lender has the right to seize and sell the gold through public auction at the cost of the borrower if you haven’t adhered to multiple reminders. You will also have to bear the late payment charges as well as a reduction in your credit score.

Armed with this information, you know what to look for when choosing an online gold loan. While scouting for the best gold loan in India, consider a lender who offers repayment flexibility and value-added features. One great option to consider is the Bajaj Finserv Online Gold Loan. When you opt for it, you enjoy benefits such as a competitive interest rate, a variety of repayment options, a part-release facility as well as world-class safety protocols to keep your gold assets secure. You can also part-prepay and foreclose your loan without any charges. To get up to Rs. 20 lakh, apply online from the comfort of your home, or visit your nearest Bajaj Finserv branch.

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