The requirement of funds can arise at any time, and when it does, you might not have sufficient savings. In that case, a loan becomes a good option. If you have gold assets to your name, you can pledge those assets and avail a gold loan. A gold loan is a personal loan which allows you to meet any financial requirements that you have. The credit is available quite easily and also quickly so that you get funds at the earliest.
Though a gold loan is readily available, there are some things about the loan which you should know before you avail it. These things include the following –
Valuation of the loan
A gold loan is issued based on the value of the gold assets that you pledge to the lender. Lenders usually accept gold, which has a purity of 18 karats to 24 karats. The purer the gold, the higher would be the quantum of loan that you can avail. If there are any precious stones or diamonds in the ornaments which you have pledged, their value would not be considered in determining the amount of loan. Only the value of gold would be considered. Moreover, the rate of gold as on the valuation date is taken into account by the lender while valuing gold. Thereafter, the loan is offered for up to 75% of the value of the pledged gold.
The repayment tenure allowed for gold loans ranges from 1 day to up to 36 months. You can choose any tenure within the given range as per your suitability. Moreover, gold loans offer multiple repayment options for paying off the loan. These options include the following –
Interest EMIs – under this option, only the interest on the loan is paid in EMIs over the repayment tenure. The principal amount is paid when the repayment tenure comes to an end.Bullet repayment – under this option, the principal amount of loan and the aggregate interest over the loan period is paid in one lump sum after the completion of the loan tenureNormal EMIs – this is the conventional mode of paying off the loan where a part of the principal amount and the interest is paid in EMIs.
Custody of the pledged assets
The gold assets that you pledge for the loan would remain in the custody of the lender. You would not be able to avail your pledged assets till the loan is repaid. The lender keeps the gold assets safely over the repayment tenure, and once the loan is repaid, the assets are handed over to the borrower.
Foreclosure or prepayment
To cut down on the interest payments, you might want to prepay a portion of the loan before the stipulated tenure. Alternatively, you might also want to pay off the loan in full and rid yourself of the debt. Gold loans allow prepayments and foreclosure, but there might be certain terms and conditions attached to these facilities. So, before opting for prepayment or foreclosure, read the fine print.
Knowing the essential aspects of a gold loan would allow you to avail and service the loan effectively. So, remember the afore-mentioned things before applying for a gold loan.