Gold Loan Low-Interest-Rate

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During this lockdown number of people are applying for gold loans and seeking out lenders even though it’s always advisable to go for a gold loan rather than going for a personal loan. As. There has been a sudden increase in gold prices a lot of factors have been affected. And the factors affected by this are:

1) Gold prices:- The first component to affect all of this is gold, of course. For the last year, there has been a lot of fluctuation in the gold price. The gold prices are rising steadily; the gold rate today is INR 49,400 for 10 kg (24k gold). These soaring prices have affected gold loans a lot as gold jewelry is a basic ornament found in every Indian household, so people are using it to fulfill their financial needs during these tough times. 

2) Interest rate:- Experts advise going for gold loans rather than personal loans or credit cards. Because a gold loan doesn’t require much paperwork, and you don’t have to maintain any credit score for it. And gold loan usually gets accepted pretty quickly, and the process is also easy when compared to a personal loan. And interest rates of personal loans and credit cards are 10%-16% and 16%-32%. Some banks like Federal Bank gold loan give gold loans at 7%p.a. Due to covid, there has been a lot of changes in gold loan interest rate, there has been a decrease in interest rates charged by banks. So if you want to go for a gold loan, there are some things you should know to move ahead and apply for it:-

3) Jumping interest rate:- Interest rate usually differs from bank to bank or lender to lender, many gold rate companies increase the rate, and the reason for that is also different for every bank. So do your research before applying for a loan and compare all the interest rates of different banks. Also, read all the terms and conditions regarding interest and repayment carefully to avoid any future problems while repayment.

4) Fixed Interest Rate:- Once you’ve applied for a gold loan, the interest rate for every month would be the same. And this concept is known as a fixed Interest rate where there charge a specific amount of interest every month. 

5) Compound Interest:- The concept of calculating interest on the monthly interval of your principal amount is called compound interest. It is an industry-standard for calculating interest. Most customers assume that they will pay according to the simple interest, which is completely wrong. 

6) EMI:- Equated Monthly interest, where you pay your monthly interest along with a part of your principal; though some banks allow you to pay the principal amount at the end, you can’t miss a month to pay EMI interest, banks charge penalty whenever EMI’s are skipped. 

7) Increase in LTV:- Due to pandemic, a lot of people are facing financial issues and going for gold loan, and as there has been a lot of demand in gold loan, RBI has imposed a new rate for LTV, i.e. 90%. Earlier it used to be 75-85% which is usually low, so if you had gold whose value was INR 6000, you used to get 52000 only, which is pretty low, but now you’ll get INR 55000, but no bank gives gold loan with LTV rate 100%. 

8) Tenure:- Due to COVID-19 government has allowed the banks to extend the tenure; well, banks already had the flexibility to extend the tenure, but as every bank has a different business model, so it was up to them if they want to, but now they’ll have to extend the tenure as due to this pandemic a lot of people are unable to pay off previous dues. 

Conclusion:

So if you’re thinking of taking a gold loan, make sure to read all the terms and conditions carefully, discuss the interest rate and tenure according to your capacity of repayment. 

 

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