As per a recent report, the gold loan market in India is expected to grow at an annual rate of 15.7% and rise to Rs.4.617 trillion in the FY March 2022. The figure shows a commendable growth as the number was stuck at Rs.3.448 trillion in FY March 2020.
Indian’s love for gold needs no introduction, and as it is a perfect hedge against inflation. Hence, when financial vulnerabilities arise, individuals tend to liquidate this idle asset.
Along with that, you can get the loan with gold Indian Jewelry you can easily get from banks
While acquiring gold financing is easy in any market condition, individuals must avoid certain mistakes while applying for gold loans. Below are six such factors that individuals must be aware of and avoid accordingly.
· Being unaware of the lender’s credibility
Gold loan is a secured financing option meaning individuals have to keep the pledged gold with the lender until they repay the gold loan in full. The concept behind pledging gold items is to protect the given money in case a borrower defaults. Therefore, if borrowers fail to repay, lenders will keep pledged gold and recover the losses incurred.
Whereas lenders ensure complete recovery of money in case of default, borrowers must do the same. While borrowers apply for a loan against gold, they must check the credibility of lenders and assess their market reputation.
Further, they need to verify the gold storage and related security measures and find out the best gold loan company that ensures robust security as well as credibility.
· Not checking out options
Gold loan is the best funding option in case of emergency situations. Subsequently, individuals rush to lenders to tide over their financial crunch. However, irrespective of their urgency, every borrower has to compare lenders and make the most of it.
There are several lenders in the gold loan market who are ready to provide gold financing instantly. However, while applying for this advance, individuals must conduct a thorough research about market trends and evaluate various lenders and make a note of their offers and shortlist a few options.
· Not understanding repayment structure
Another mistake individuals should avoid is being ignorant about the repayment structure. To ensure a seamless loan availing experience, individuals must understand various repayment options available with the lender and select one that suits them best with the help of a gold loan calculator.
- Fixed EMI: One of the most common repayment options is the fixed EMI or regular EMI that best suits salaried individuals who have fixed monthly incomes. EMIs include both principal and interest amounts.
- Interest EMI: Here, individuals pay the interest portion of gold loan as EMI and the principal amount is paid at the end of the tenor. This repayment option is ideal for individuals who have the assurance of getting a large sum at the time of maturity.
- Partial repayment: With this repayment structure, borrows can repay interest and principal as per their suitability.
- Bullet repayment: Individuals opting for bullet payment can repay both interest and principal at the end of the tenor. However, the interest will be computed monthly and collected upon maturity.
- Not knowing the quality and form of gold jewellery
Having knowledge regarding the quality and form of gold jewellery is an essential fact that individuals must consider. While providing a gold loan, lenders evaluate the quality of gold jewellery which must be 18-22 carat.
· Avoiding LTV calculation
Loan to value ratio or LTV refers to the amount individuals would get against their pledged gold. As per the RBI guidelines, fresh gold loans sanctioned on and after April 2021 will fetch an LTV of 75%. For instance, if a borrower pledges gold worth Rs.1 lakh, they will get a gold financing of Rs.75,000.
Different lenders assess various parameters to decide the LTV of a gold loan. Therefore, individuals wondering how to gold loan must know these parameters to get the most value. Reputed NBFCs like Bajaj Finserv offers high-value gold loans at affordable rates of interest.
Individuals looking for the best gold loan must avoid the mistakes mentioned above and choose a lender that offers the best rates and allow repayment flexibility.