Obtaining a gold loan is a viable option for those who are in urgent need of sizeable funds. This financial option is considered affordable due to its secured nature and competitive gold loan interest rate. However, certain factors affect the interest rates on gold loans.
Therefore, borrowers need to know everything about gold loan interest rate.
Factors affecting gold loan interest rates
Ideally, borrowers desire to have the lowest gold loan interest rate to reduce financial pressure in the long run. To settle for the lowest rate of interest, one needs to consider certain factors as follows:
- Inflation: With higher inflation, most individuals rush to invest in gold as the value of currency falls. Further, if the inflation continues for a prolonged period, the price of gold increases, and the chances of availing of gold loan scheme at lower interest rates increases.
- The market price of gold: A gold loan is a secured financial instrument where individuals pledge their gold assets and receive funds against them. Therefore, if the market value of gold increases, the value of pledged ornaments also goes up. Under these circumstances, the lending risk is low, and the interest rates offered become more competitive. Hence, borrowers can avail of gold loans at low interest rates.
In addition to these, customers with a high credit score can also enjoy perks and benefits by using this credit instrument. However, individuals with low or zero credit scores can also procure a gold loan.
Apart from the factors affecting gold loan interest rates, one should also understand how the interests are calculated.
Calculation of gold loan interest
Gold loan borrowers pay to clear dues comprises of two components- principal and interest. Therefore, subtracting the principal amount from the EMI (Equated Monthly Instalments) will generate interest. Moreover, one can easily evaluate their EMIs by using an online calculator. Based on the interest component of EMI, borrowers can repay the lowest gold loan interest rate effectively.
Other than lower interest rates on gold loans, borrowers must know several other charges before choosing a particular lender. On top of accruing benefits concerning interest rates, borrowers can choose flexible repayment options on a gold loan. These charges are documentation fees, stamp duty, penal interest, foreclosure charges, document or statement charges, cash handling charges, and auction charges.
Gold loan repayment options
Borrowers must decide on the ideal way to payout their gold loans at minimal interest rates out of the three flexible options:
- One can pay the interest component periodically and the principal amount at the end of the loan’s tenor.
- Borrowers can also pay the interest upfront and the principal throughout the tenor.
- Applicants can pay out both components in easy EMIs.
Therefore, it is imperative that it comes with easy repayment solutions along with a low gold loan interest rate.
Nevertheless, loads of other features of a gold loan make it a desirable option among customers.
Features of a gold loan
Individuals can obtain substantial funds by leveraging their gold equity upon meeting simple eligibility criteria. These funds can come in handy in times of utmost need. Here are some special features of this financial instrument:
- Evaluation process: Gold assets are valuable that requires safety while handling. Therefore, evaluating these assets is carried out with an industry-grade carat meter that ensures authenticity and accuracy. Further, reputed financial institutions provide this feature from the comfort of a borrower’s home.
- No-end use restrictions: Applicants receive a sizeable loan amount on their gold loans that can be used for a number of purposes, including medical emergencies, restocking inventory, and more. Therefore, these loans come with zero-end use restrictions, making them feasible for borrowers in urgent funds requirements.
- Safety protocol: Renowned lenders like Bajaj Finservoffer industry-best safety protocols for an applicant’s pledged gold items. They store the items on state-of-the-art vaults, under 24×7 surveillance in rooms equipped with motion detectors.
- Part-release facility: Individuals planning to release some of their gold assets can do so by repaying the equivalent amount. Therefore, with this secured loan, one can enjoy flexibility in terms of pledged items.
- Part-prepayment charges: There are zero part-prepayment charges on a gold loan.
Additionally, some financial institutions offer complimentary gold insurance upon availing of their gold loans.
Therefore, besides featuring a competitive gold loan interest rate, several other features make it a hassle-free financial option.
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