Investing in Gold is an old tradition in India. We use gold more as a medium of savings and for uses pertaining to weddings. But recently this trend has slowly changed and now Gold is not only a saving instrument but also is a credit instrument. By taking a gold loan, one can get quick money. Hence many who require a loan urgently can apply for a gold loan. Having a bad credit history doesn’t matter much here as your gold is kept as collateral.
But before taking a gold loan, there are many factors which you must know about. In this post, we have listed 5 such mistakes while applying for a gold loan;
Don’t accept higher interest rates:
You can get up to 75%* of the gold value as the loan amount. Hence most Banks and NBFCs provide different types of gold loans where you can get 50%, 60% and also up to 75%*. But in order to get such a high loan value, Banks might keep higher interest rates too. Although you will get a higher loan amount, you will also end up repaying a higher interest rate. Hence be wise and get a gold loan at lower interest rates.
Understand all hidden charges:
You must also find out about all the charges mentioned in the loan application. Just because the lender is offering lower interest rates doesn’t mean it is a good deal. Read the loan application carefully and find if there is any maintenance or hidden charges which are being applied on your loan. Be careful as this might mean you will repay a higher amount back to the lender.
Not choosing the right tenure:
Taking any kind of a loan is a big decision. Hence it is better to understand how much cost you will be repaying to the bank including interest amount. If you choose a longer tenure, then you will repay lower EMI’s but end up paying a higher interest amount at the end of the tenure. In case you choose a shorter tenure, you will repay higher EMI’s but end up repaying lower tenure.
Know about Gold auction:
Did you know that if you cannot repay your gold loan back to the bank then they have the full rights to auction your gold? If you don’t want such a scenario to happen, then please discuss this with your bank. They must provide you with a formal notice and prior intimation before finalizing the auction of your gold. You can either renew your gold loan by increasing the tenure or move it to another bank.
Understand interest rate calculation:
There are different ways interest rate is calculated. There are banks who will charge you higher interest whenever you miss an EMI payment. Hence please be clear with the Bank regarding how you will be paying back the loan and also if the EMI percentage is fixed or fluctuating.