An emergency funding quest for company operations or individual requirements may come up at any time. These situations generally prompt you to look for fast monetary support. An immediate gold loan is a simple and quick approach to getting the necessary funds. In such a situation, you will not try to research for more options. As an alternative to sitting unused in your locker, your gold assets may come into action. Your Gold assets have always the potential to be turned into financial assistance.
A gold loan is an ideal option for any sudden financial necessity. To get a financial loan against gold, simply offer your valuable gold jewellery items. All of your offered gold jewelry or items will be given back; don’t think you will not get those back. Once you repay the borrowed amount, including interest charges, you will get your gold items back. However, you have to follow all the terms and conditions specified by lenders. Isn’t it an easy way to get some financial back-up during hardships? Of course, it has proven many times for many people to be a better option than others.
Yet, being knowledgeable about how it works and where to get it is crucial. It is also important to know for what duration a person can get a loan amount in exchange for gold.
When you are unfamiliar with key loan terminology, you may be confused when considering a loan or looking for loans from different lenders.
The following are common terms for gold loans that will help you increase your loan expertise and make smarter financial decisions.
- Loan-to-Value Ratio
The loan-to-value ratio represents the ratio that comes from the offered loan amount by a financial firm and the market value of gold items provided by a borrower. For a clearer view, suppose you have offered a banking institution or NBFC GOLD ornaments worth Rs. 1 lakh. The bank or NBFC offers you an amount of Rs. 80K. Then the LTV Ratio will be 80%.
- Rate of Interest
The rate of interest in gold loans means the agreed-upon rate that the bank or NBFC will charge you annually for lending funds. It will be a certain percentage of the loan amount. In the case of fixed rates, the interest will remain the same. From the beginning to the end of loan tenure, it remains fixed at a certain percentage. But in cases of floating rates, the interest rate will fluctuate as per the market conditions and other external factors.
- Gold Appraisal
Gold Appraisal defines the processes involved in checking and assessing the purity and worth of gold. These may be ornaments or items presented to the lenders by a borrower. These items actually play the role of collateral in the case of gold loans. Proficient appraisers evaluate the purity of gold and its worth as per market rates.
- Loan Term or Tenure
Loan tenure refers to the duration for which a financial institution lends money to a borrower against his/her gold items. This duration may be from a few months to a few years. Tenures may vary from bank to bank or NBFC to NBFC.
The term of the gold financing will also vary according to the lending institution. For example, HDFC Bank provides gold loans with durations ranging from 3 to 24 months. The term of repayment for an SBI gold loan is generally 36 months. Muthoot Finance provides a choice of gold loan solutions with different repayment durations.
Some lenders give customers the option of getting a gold loan based on their monetary objectives and needs. Several loan plans provide borrowers with an extensive range of options, which include gold loans with the highest tenure and gold loans with the lowest sum.
- Loan Disbursement
When any financial firm accepts a loan request from any borrower and, after approval, grants the requested money to the applicant’s banking account, this is called loan disbursement.
- Foreclosure
Whenever you’re taking out a gold loan that features an EMI repayment structure. You have the flexibility of returning the entire amount owed in advance of the loan tenure ending. Yet, gold-backed loans typically include a pre-closure charge, which differs according to the bank/NBFC’s terms and conditions.
- Monthly EMI Option
Returning a gold loan in monthly EMI-based repayments. This sort of loan repayment strategy is tailored for salaried people who earn a certain salary each month. The EMI involves payments for both the interest being charged and the principal sum.
- Partial Payments
Partial payments define the alternative of making part payment of the principal and interest sum. Because sometimes a borrower sees fit rather than rigidly adhering to the lender’s EMI plan. The ability to do so enables you to customize your loan repayment schedule according to your current financial circumstances. Paying a lump sum amount against the amount owed in principal at the start might help lower your overall burden. Because the interest rate is computed monthly on the outstanding balance of the loan. Finally, choosing this alternative can result in bundles of savings on interest payments.
- Bullet Repayment
A “bullet repayment” is an option for paying back a gold loan once at a time. In this approach, the costs of both interest and principal are fully reimbursed at the closure of the loan term at once. This approach enables customers to make just one repayment in the entire term. Applicants take advantage of not adhering to an EMI plan. The interest accumulated on the loan’s balance will be paid off along with the principal amount.
- Gold Seizure
In some cases, borrowers fail to meet the agreed-upon terms and conditions. These conditions are generally agreed upon at the time of loan authorization and approval. In these situations, the financial institution or lender has the authority to seize collateral. They can seize the gold materials provided as collateral. The lender does so to recover the amount paid to the customer as a loan.
Bottom Line
A gold loan may help you get through any challenges with money; meanwhile, you must keep certain factors in mind whenever asking for financial assistance.
Many individuals lost their employment, causing financial difficulties. Furthermore, handling rising costs such as school fees, medical bills, and business-related costs has forced many to tap into their savings accounts. In some cases, to seek financial aid through assets, particularly gold ornaments. Lenders provide numerous forms of loans to meet this need. Sometimes, other forms of Loans get denied for various reasons. In such cases, when you need finances quickly, seek a loan by putting up your gold jewellery.
Borrowing money against gold has been a long-standing tradition in India. Aside from being an appealing investment choice, it can help you manage an economic downturn. At moments of anxiety can support something in particular or cover medical expenses. It offers various advantages, including fast cash, competitive interest rates, and hassle-free returning options.