• June 7, 2023

Few Things You Should Know Before Applying For A Gold Loan

Gold Loan Pay

In the upcoming years, with the increasing cost of living and economic uncertainties, people are turning towards gold loans as an alternative to traditional loans. A gold loan can be a viable option for those needing urgent cash. Gold loans are secured loans where you pledge your gold jewellery as collateral to the lender in exchange for money. The loan amount is generally a proportion of the value of the gold that is pledged, and the interest rates are lower than in unsecured loans. Here are some noteworthy things to know when applying for a gold loan online or offline.

Interest Rates

When taking a gold loan, the interest rate is the most critical factor to consider. The interest rate on a gold loan may vary depending on the lender, the loan amount, the loan tenure, and the quantity of gold. Some lenders offer interest rates as low as 12% per annum, while others may charge higher per annum. It is essential to understand that the interest rate is estimated per annum and, which can be paid on a monthly, quarterly, or yearly basis based on the scheme. Muthoot Finance offers competitive interest rates on its gold loan schemes, making it a cost-effective way to meet your financial needs. Even in emergency situations, when customers are unable to make necessary payments due to a lack of funds, they may be offered a minimum due option, which would allow them to keep their loan accounts open with few payments. The payment will consist of a tiny bit of the principal as well as a component of the interest.

Loan-to-Value (LTV) Ratio

The LTV ratio is the maximum loan amount you can get against the value of the gold you pledge. The LTV ratio can vary from lender to lender and can range from 75% to 85% of the gold’s value. However, a higher LTV ratio may also mean higher interest rates. At Muthoot Finance, submit your gold loan application and get the maximum loan value on your gold.

Processing Fees and Other Charges

Before taking a gold loan, checking its processing fees and other associated charges is vital. Some lenders may charge a processing fee, foreclosure charges, or prepayment charges, which can significantly increase the loan cost. It is essential to compare the processing fees and other charges of different lenders to choose the best deal.

Repayment of Loan

The repayment options are the ways in which you can repay your gold loan. The most common repayment option is monthly interest repayment (interest is paid in equal monthly installments throughout the loan tenure). It is essential to have a repayment plan in place before you apply for a gold loan. Ensure you understand the loan repayment schedule, including the tenure, monthly interest amount, and due date. Timely repayment of the loan is crucial to maintain a good credit score and avoid late payment penalties. If possible, choose a lender that offers flexible repayment options, such as prepayment and part-payment options. In Muthoot Finance if you make payments on time you will be rewarded with milligram reward points. Each Gold Milligram reward point holds the equivalent value of one 24 ct Milligram Gold coin, which can be redeemed.

Security of Your Gold

Since gold loans are secured loans, you need to be sure about the safety and security of your gold. So choose a lender that offers secure storage facilities for your gold. When you apply for a gold loan at Muthoot Finance, you get free insurance coverage on the gold pledged, which can protect you against loss or theft. Moreover, the gold is kept in safe rooms in tamper-proof packaging to maintain its purity.
Muthoot Finance makes sure your gold is safe in an insured locker with 7 layers of security.

Know the Consequences of Defaulting

Defaulting on a gold loan can result in penalty charges, additional interest, a negative impact on your credit score, and loss of your pledged gold. The lender may seize and sell your gold to recover the outstanding loan amount and charge a processing fee for the sale of the gold. It is important to make timely payments to avoid defaulting. In case of difficulty in repayment, communicating with the lender and exploring alternative repayment options is advisable. Muthoot Finance offers customers flexible repayment options like part payment, prepayment, and pre-closure so that they can repay the loan without a burden.

The Reputation of the Lender

Lastly, it is crucial to consider the lender’s reputation before taking a gold loan. To understand their reputation, you can check the lender’s ratings, reviews, and customer feedback on their website and Google. Choosing a lender regulated by the RBI (Reserve Bank of India) is also essential as they are more trustworthy and transparent in their operations. Muthoot Finance fully adheres to all the guidelines of the RBI. And they are considered an upper-layer NBFC in India by RBI. They have 2 Lakhs of transactions per day with 5800+ branches across India and they have 100+ years’ of experience in Gold Loan sector.

You can also avail of gold loan at home with their instant loan@home service within three simple steps, with minimal documentation and attractive interest rates.

Getting a gold loan can be a great way to access quick funds, but it is necessary to understand the loan terms and conditions and consider all the factors involved before making a decision. Factors such as interest rates, repayment options, loan-to-value ratio, and processing fees should be carefully evaluated so that you get the best gold loan offer. Additionally, it is important to make timely payments and avoid defaulting on the loan to prevent the serious consequences that come with defaulting. Considering these things, you can make an informed decision and use your gold to your advantage.

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