Gold loans are the straight forward method of raising money in case of an emergency. If you need urgent money for marriage or festivals or travel, you can formally go fall for the power of gold. You can mortgage your gold ornaments to the bank and financial institutions. You do not need to sell the gold ornaments in the market; you can simply mortgage it to the moneylender. However very often people make some fundamentals mistakes while “Apply For Gold Loan“.
1. Lenders Credibility: – A major blunder that people commit is taking a loan without checking lenders credibility. In a gold loan, you have cash in hand but for that, you have pledged your gold ornaments. Therefore the risk is more on the borrower as compared to the lender. You must check the background of lenders. A gold loan can be risky as a gold ornament will be kept by the lender till you pay the whole amount. So you must take a gold loan from reputed banks or financial institutions as they abided by RBI regulations.
2. Less Research: – You would be doing less research while applying for the loan. When you search online you will get many websites showing you interest rates or processing fees but take your time. Do not run for choosing the first offer. The more you will search, you will get better options.
3. Negligence of repayment structure: – Another common mistake is the negligence of the repayment structure. It is extremely important to study these structures and select the best one for yourself. Check your liquidity of cash flow so that you can pay the EMI amount other you will end up losing your gold jewelry. There are many options for paying the loan amount like Regular EMI, Only Interest EMI, and Partial repayment, Bullet repayment. You can select the best suitable method by yourself.
4. Read all conditions: – Before applying for a gold loan always remember the devil lies in the detail. So get the clear aspect of loan to value calculation. Borrowers must understand how the bank or financial institutions in calculating the value of your gold and based on that you will get the amount of loan. As a borrower, you need to have a good idea about the market value of gold. Mostly Bank offers loans at 22 carats of gold or above. If the gold ornaments are less or impure then the loan can be rejected. Gold coins are also accepted if they are above they can be accepted as collateral.
5. Not Checking prepayment charges: – While lenders do charge any prepayment fee for a “Gold Loan“ but some charge some 2.5% from the outstanding amount if you pay before the tenure period. The prime objective of making prepayments is to save on the interest cost; incurring prepayment penalties would reduce the benefit from making prepayments. Hence, opt for a lender that charges minimal or no prepayment/ foreclosure fee.
To conclude you must remember all the above-mentioned points while applying for a gold loan.