7 Things to keep in mind while Availing a Gold Loan

7 Things to keep in mind while Availing a Gold Loan

Gold loans occupy a special place in the portfolio of the Indian financial service industry and is one of the oldest forms of secured lending, as gold pawning has been prevalent in India for centuries. Given the liquidity it offers, gold helps both the borrower and lender to complete transactions faster than all other forms of financing.

However, the next time you avail a Gold loan, keep an eye out on the below points, it may save you a lot of hassle.

1. Focusing only on getting the Highest Loan Amount on your Gold
   The loan amount depends on the 22 ct Gold rate prevalent in the market and the Purity of the Ornaments. While the maximum Loan to Value permitted by RBI is 75% (that is for Gold worth Rs. 10,000, the maximum loan you can get is Rs.7,500), NBFCs and Banks offer schemes with varying LTV. Often the highest LTV schemes are provided at higher interest rates. You must be cautious when choosing these schemes to avoid high interest burden later on. The most beneficial schemes are those that provide higher Loan amounts at lower interest rates.
2. Ignoring how Interest Rate Calculation of the scheme work
   Generally Banks & NBFCs advertise schemes that show very low interest rates. Depending on the terms & conditions of the scheme, you may end up paying higher interest if you do not take a closer look at how the interest is calculated. Some companies charge Jumping interest rate where your interest jumps with passage of time or on missing your monthly interest payment or Rebate based interest calculations, where you are given discounts for paying the interest on time. It is in our best interest to know how the interest will be actually calculated.
3. Choosing Wrong Repayment Mode
   There are various repayment mode that could be offered on your Gold loan. Generally, Banks offer EMIs as a repayment method whereas NBFCs charge monthly interest. In case of missing your EMI, you will be liable to pay hefty penalty charges. Similarly, though NBFCs only demand monthly interest, a failure to make this payment monthly might lead to higher interest rate. We need to be careful in choosing a payment method which suits our cash flow requirements. Niskha Finance offers flexible repayment option where a customer can pay at any time during the tenure of loan without any penalty or change in interest rates.
4. Not asking about Charges
   Charges such as processing fee, appraisal fee, foreclosure charges, penal charges etc. are always applicable on loans. However, not all Gold Loan providers may make you aware of these charges while taking the loan. Some may be hidden in the Terms and Conditions. These charges might come as a surprise later and can be burdensome. It is wise to ask the company of such charges and always factor it in your calculations to know the true financial cost of your loan. Niskha Finance offers transparent schemes with no hidden charges.
5. Selecting The Incorrect Tenure
   Essentially, Tenure means the duration of your Gold loan. Tenure may vary from 3 months to 3 years, depending on the Company and the Scheme. Always chose a tenure that suits your needs and works in your best interest. For example, in a long tenure loan, you might be paying higher interest in a jumping rate of interest scheme long tenure. In an ultra-short tenure like 3 months, the ornaments may be auctioned very soon after loan expiry. Depending on your cash flow visibility and repayment capacity, optimal loan tenure would prove to be beneficial and cost saving. Niskha Finance provides flexible loan tenures from 3 months to 12 months, based on the customer needs.
6. Being Unaware Of Auction Terms
   In case the loan is due past its tenure or if you are unable to repay the interest or principle amount on time, the Gold Loan Provider can put out the gold for Public auction to recover the Due amount. It is in our interest to discuss and understand the auction terms & penal charges before availing the Gold loan. Get to know your rights in the case your gold is put out for auction, these rights generally include entitlement to prior intimation and formal notice before auction. In case you are facing such scenarios elsewhere, contact Niskha Finance for a take-over, we will help you and save your Gold from auction.
7. Not evaluating Customer Service
   Customer service is the most neglected feature as many customers only focus on solving their immediate need for money & just look at the loan amount or interest rate. Imagine if the staff behaviour is unsatisfactory during the time of applying for a loan, then what would be the behaviour later. Don’t ignore such signs and only do business with people you are comfortable with. Always consider the company with a customer friendly track record. It will save you a lot of hassles and allow for mental peace.

Conclusion

It is always beneficial to be cautious as a customer. Consider the above point to make an informed decision. Please do not be swayed by marketing gimmicks and tricks, always ask the correct questions and be aware of your right. Hope with this information, you will ensure that the next gold loan you apply for works in your best interest.