5 things to keep in mind before applying for a Gold Loan

You can get a quick loan to cover all your urgent needs by pledging your gold jewellery. Gold loans are offered by various banks and financial institutions at competitive interest rates with multiple repayment options.

When you opt for a loan against your gold jewellery you also benefit from the low gold loan interest rates, easy application process, and quick approval. Depending on the current market price of gold, you can get a loan for up to 75% of the value of your gold jewellery.

Here are a few things that you should keep in mind before taking a gold loan.

Credibility of the lender

When applying for a gold loan, it is important to check the lender's credibility. In the unorganised gold loan market, several informal lenders provide easy gold loan with low interest rates. However, because banks and NBFCs are seen as safe options, it is often recommended to choose them when applying for a gold loan. Compare the interest rates, eligibility requirements, and amount being offered. Usually, NBFCs that offer gold loans have lower interest rates or processing fees than banks.

Interest rates and charges

Different lenders offer different interest rates and processing fees on gold loans. Therefore, it is important to compare the interest rates and processing fees of various lenders before taking out a gold loan. You should choose a lender that offers competitive interest rates and low processing fees to minimise the cost of borrowing. Most reputed lenders charge an interest rate that starts at 0.83% per month.

Loan tenure

Before taking a gold loan, consider the loan tenure, which refers to the total duration you have, to pay it back. Ensure that you can repay the loan within the stipulated period, as defaulting on the loan can lead to additional charges and penalties.

Repayment options

Another crucial factor to consider before applying for a gold loan is the repayment option. Leading banks and NBFCs in India offer multiple repayment options for gold loans. You can repay the entire interest amount at the start of the loan tenure and pay the remaining principal later. You can also opt to pay interest on a monthly, bi-monthly, quarterly, half-yearly, or annual basis and pay the principal amount at the end of the loan tenure.

Also, the gold loan EMI calculator provided by lenders allow you to estimate the loan amount based on the weight and purity of your gold jewellery. This helps you get an estimate of the repayment liability beforehand.

Gold purity and valuation

Check the purity of the gold that you intend to pledge for the loan. Most lenders only consider pure gold jewellery worth 22-karat or more. Reputed lenders like Bajaj Finserv have a transparent gold evaluation process. To ensure that you receive the maximum value for your gold jewellery, top-of-the-line karat meters are used. Also, the pledged gold jewellery is stored in highly secure vaults under 24x7 surveillance.