Many times we need a gold loan for expenses like children’s education, marriage or building a house. But before taking a gold loan, you should know its pros and cons well so that you get the full value of your gold. Also, you do not suffer any loss at the time of interest or repayment. Let’s know everything about gold loan
Gold is such a metal which has always had its own importance all over the world. From common women to kings, people were fond of wearing its jewellery. But, its most important role was in the monetary system.
Even today, the economic strength of a country is judged by the amount of gold reserves it has. Sometimes governments even take loans by mortgaging gold. Common people also often take gold loans.
In such a situation, we are telling you how to take a gold loan, where to take it from and what things should be kept in mind while taking a gold loan.
For what purposes should the loan be taken?
You can take gold for works like children’s education, marriage or medical expenses in an emergency. It is considered safer than other loans. But, taking a gold loan is right only when money is needed for some time only.
Before using a gold loan for big expenses like buying a house or land, the risks should be carefully considered.
Should you take a loan from a bank or an NBFC?
This depends on your convenience. Gold loan is available at a lower interest rate in a bank. On the other hand, non-banking finance companies (NBFCs) charge higher interest but also give a higher loan amount.
The main business of an NBFC is to give loans against gold, so gold loans are approved quickly there. However, before taking a loan, you should find out the interest rates in different banks and NBFCs.
The good thing about gold loan is that it is cheaper than unsecured loans like personal loan, property loan, corporate loan.
Also pay attention to the extra charges
Like other common loans, gold loans also have processing fees, which vary according to banks and NBFCs. Some financial institutions also give concessions in this. GST is also levied on processing fees.
Some banks and financial institutions also charge valuation fees, which starts from Rs 250. There are also some other expenses like service charge, SMS charge and secured custody fee.
Which option to choose for repayment?
The lending institutions give you many options to repay the loan amount and interest. If you are employed and you get money every month, then you can make payment in EMI. You also have the option of paying interest along with the principal payment in lump sum.
Banks usually provide gold loans for 3 months to 3 years. It depends on you for how long you need the loan or in how much time you can repay it.
How to get a loan against gold?
The first condition for taking a loan against gold is that the gold you are pledging should be at least 18 carat pure. Banks or NBFCs give loans only against jewellery and gold coins. You cannot pledge gold coins weighing more than 50 grams. Financial institutions do not pledge gold bars either.
What if you default on the loan?
The general rule of loan applies here too, if you are unable to repay the loan on time, then the financial institution has the right to sell your gold. Also, if the price of gold falls, you may be asked to pledge additional gold.