- Do you know a gold loan has more than one repayment method compared to just one in most other loans?
- Read here about those repayment options, as well as check some other details that are unique about this loan
Over the years, a Gold Loan has proven its worth to the customers facing the temporary cash flow issues. You must be thinking how? Well, when customers feel that they have run out of options to meet urgent financial needs, a Gold Loan can be their savior because of the ease and convenience it provides to people. Just submit your sitting-idle-at-home gold jewellery to lenders (Banks and NBFCs) and you can get the required loan amount against it. With the gold rates on the rise, you can get a higher loan amount against the precious yellow metal. Since your jewellery will act as collateral against the loan amount, you can enjoy affordable interest rates as lenders feel more confident while lending.
But a Gold Loan has a few things that many may not know. These things about Gold Loan are quite different from what you see in some other loans. In fact, these things largely contribute to the popularity of this amazing loan option among borrowers. When going for a Gold Loan, it is important that you understand them. We will not let the suspense go on as we explain all these things in this post. Let’s read those and apply for a gold loan smartly to meet your needs.
What are those Things About Gold Loan that Many Could be Unaware of?
As we told Gold Loan helps customers get the required loan amount against their jewellery. If we list down the things about gold loans that many people could be unaware of, some of the prominent ones are Flexible Repayment Methods, Option of Overdraft, No need of income or credit score for approval, etc. We are showing details about each of them below. Please check.
Flexible Repayment Methods
You may not find as many repayment methods in any other loans as you would get in a Gold Loan. Yes, it is true that lenders allow you to choose from more than one repayment type in a gold loan. Generally, in the case of other loans, the most popular repayment option is considered to be Equated Monthly Installments (EMIs). But in the case of a Gold Loan, customers get three other options apart from the EMI method. While going for a Gold Loan, it is important to choose the suitable repayment method according to your repayment capacity and monthly income. Also, a borrower feels more comfortable when he or she has more than one repayment method to choose from.
We are providing all the Gold Loan repayment methods below and also telling briefly about them. Do check.
- EMI Method – This comes with Fixed Monthly Installments that will have a portion of both your principal and interest amount. For the estimation of monthly installments, you can also use the Gold Loan EMI Calculator.
- Interest Payment at Regular Intervals – Pay the Interest for your loan amount on a Monthly/ Quarterly/ Semi-yearly/ Yearly basis according to your convenience and pay the principal amount at the end of the loan tenure
- Upfront Interest Payments – Pay the total interest amount at the start and pay the principal amount at the end
- Bullet Repayment – Don’t pay even a single rupee during the tenure. Instead, pay both principal and interest amount at the end of the loan tenure.
One of the most amazing things about the Gold loan is that lenders can also provide the loan amount via Overdraft. So what is this all about? Well, lenders usually disburse the loan amount to customers against their gold and they will need to pay it back within a fixed tenure. The interest will be charged on the total loan amount. But in the case of an overdraft, lenders decide an overdraft limit according to the overall price of gold ornaments. A borrower can utilize as much as he or she wants within this pre-decided limit.
The best thing about the Gold Loan Overdraft facility is that the interest will be charged only on the utilized amount and not on the overall amount. Also, the interest will be charged only for the time until you repay it back. Let’s understand this with an example. Suppose your overdraft limit is INR 4 lakh against your jewellery. Now, you used INR 2 lakh from this limit and repaid it after 3 months. So the interest will be charged on this utilized amount and for 3 months only. A gold loan with an overdraft facility suits those borrowers who are facing some smaller emergency expenses and need funds for it. This is one of those things about Gold loans that not many people would know.
No Need for Income and Credit Score
In the case of a personal loan, if you don’t have a sufficient income and the required credit score, lenders may reject your loan application or you may have to pay higher interest rates. Well, there are no such things with a Gold Loan, barring the higher interest rate part which can be true in some cases. Borrowers don’t need to qualify any condition related to Income and Credit Score to get a loan amount against their jewellery. The reason: Gold Loan is a secured loan and lenders feel less credit risk due to the pledged gold. In the case of any non-payment or default, lenders can recover the outstanding balance.
A customer only needs Gold with a minimum purity of 18 karats to get the loan amount. Different lenders may have different eligibility criteria regarding the purity of gold. There are no income and credit score requirements for getting a Gold Loan. Moreover, borrowers can improve their credit score if they make timely repayments. So, it’s a win-win situation from both sides for a customer.
Loan Amount Depends on the Gold Composition
In the case of a Gold Loan, the loan amount is decided based on the overall price of Gold. Lenders provide loan amounts upto 90% of the overall gold price. But there is a thing that a lot of people could misunderstand. This thing is about the Loan amount itself. Lenders decide the loan amount according to the composition of gold in jewellery, which means the weight of any gems or stones will not be included in the gold evaluation.
So, the final loan amount will be according to the composition of gold in your jewellery. So, if you were thinking that you can get the loan amount based on the overall weight of your ornaments, you have found a reason for not carrying that impression any longer. However, lenders do accept coins, particularly those minted by banks with a purity of 99.99% and upto 50 grams of weight.
You can Lose your Gold on Non-payment
Lenders provide the loan amount against the gold ornaments to customers who need to repay it within a fixed tenure. In any situation where you are unable to repay the loan, lenders have all the right to sell or dispose of your ornaments in the public auction. By selling your gold, the lender can recover the loan amount with the money coming from the auction. Before selling gold ornaments, lenders send reminders and legal notices about the payment. If you do not pay attention to such intimations, selling ornaments via public auction remains the last resort for a lender.
After the auction, when the due amount is being settled, the lender returns the balance and rest of the ornaments (if any) to the borrower. A lender can even sue the borrower for the remaining loan amount in case the due is not being settled even after the auction. Other than this, if you do not make timely payments of your Gold Loan, your credit score will be affected negatively.
Take a Gold Loan Multiple Times
You can opt for a Gold Loan on the same jewellery or coins for as many times as you want but not multiple loans at a time on the same jewellery. Clear off the first gold loan first. You can also make a prepayment of your gold loan. After this, lenders will return your gold. There is no restriction on the number of times you can opt for a loan amount against your gold. So, just clear off the outstanding balance and opt for a Gold Loan as many times as you want.