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A gold loan can help a small business or even a household to tide over an emergency cash crunch as a secured financing option. Gold loans do not have end-use restrictions, which means individuals can use the loan amount inany way they deem fit. Also, the loan availing process is simpler than other traditional financing options, making them ideal for those in need of emergencycash.
Since the loan availing process is simpler, individualsmust be careful about certain things before applying.
Consider four parameters before applying for a loan against gold
- Loan to value ratio (LTV): The loan to value ratio or LTV refers to the amount of gold loan individuals can get against the collateral’s market value. In the case of gold loans, RBI has raised the LTV cap from 75% to 90%, meaning individuals can get loans up to 90% of the deposited gold value. Here, individuals must find financial institutions that offering them higher LTV and choose accordingly.
- Repayment options: Various financial institutions offer different repayment options. It can include bullet payment, EMI payment, part prepayment, and foreclosing options. Individuals must check repayment options and select the one that suits them best.
- Additional charges: To avoid future discrepancy, individuals must read the lending institutions' internal policies (including additional charges) andensure they are reliable. Reputed NBFCs extend large amount gold loan at competitive interest rate and have no hidden costs (even on part-prepayment and foreclosure options).
- Security and gold insurance: Lastly, individuals must check if the gold loan provider ensures robust security while storing the valuables with them and if those jewellery are insured so that in unfortunate cases (while carrying gold articles to and from borrower’s home to lending institution), individuals need not have to suffer.
By keeping in mind the pointers mentioned above, individuals can get the best gold loan at competitive rates.
