Over the years and even decades, a gold loan has become one of the most widely used options for short-term borrowing, especially among those who require money right away. Due to their minimal paperwork requirements, flexible repayment alternatives, and speedy money transfers, gold loans are highly suggested for those who require money immediately. Additionally, because a muthoot gold loan is secured by the borrower’s gold, the finest gold loan bank often makes this decision without taking the applicant’s credit history into account. This suggests that everyone, regardless of credit standing, is eligible to apply for a gold loan.
But before you rush or go ahead to apply for a loan against gold, you should certainly carefully evaluate the following important factors to make the right decisions:
The loan amount being offered against pledged gold
Due to the fact that gold is used as security, gold loans can be considered secured loans by definition. How much of a loan the finest gold loan bank is ready to grant you will primarily depend on the worth of the gold you employ as collateral with the lender. This is also considered, along with other elements like the LTV ratio and your repayment capacity. Because the Reserve Bank of India (RBI) has set a maximum loan-to-value (LTV) ratio of 75% for gold loans issued by the finest gold loan banks and NBFCs, borrowers do not receive the entire value of their gold as a muthoot gold loan. Currently, financial institutions offer gold loans, usually in sums between Rs 5,000 and Rs 10 crore.
It matters what the applicable interest rate is
The lender chooses the lowest muthoot gold loan interest rate after evaluating the risk and taking into account a variety of factors, including the LTV ratio, loan tenure, loan amount, and others. For instance, because a larger LTV ratio exposes them to more risk, lenders frequently request a higher interest rate. This is done to balance out the higher risk associated with loans of this kind. The lowest gold loan interest rate normally runs from 7-8% but can reach 29% yearly, therefore before picking one company, it is crucial to evaluate the muthoot gold loan interest rate on offer. Visit online financial marketplaces if you want to evaluate several lenders and select the one that most closely matches your needs in terms of loan eligibility and financial circumstances.
The processing fees levied
Processing fees for gold loans may be a predetermined amount or a percentage of the total loan amount. Although it typically ranges between 0% and 2% of the overall loan amount, certain lenders may instead charge a flat fee as little as Rs. 10. Before sending in an application for a muthoot gold loan, be sure to take the lender’s processing fee into account. Pay close attention to how you handle this fee because it has a big impact on the overall cost of the loan, especially for loans over a certain amount.
Gold loan period
Gold loans are categorised as short-term loans because their average payback terms span from one week to three years. When choosing the length of your loan, it’s crucial to take your ability to pay into account. Select an interest-bearing term that also works with your monthly budget. You must use an online EMI calculator to receive a specific estimate of the EMI you could pay based on the loan amount, lowest muthoot gold loan interest rate, and term you select. When the tenure is lengthened, the EMI will fall, and vice versa.
Additional EMI-free payment options
Some lenders, like muthoot gold loan, provide borrowers various repayment options in addition to the conventional EMI option, which calls for borrowers to repay both the principal and the interest component of the loan. The option to pay solely interest each month and defer paying the principal until the loan’s maturity date is available to borrowers with a customised repayment schedule.
Some lenders will allow you to repay the interest portion of the loan after it has been approved, while other lenders will let you to repay the principal portion of the loan closer to the term’s end. Borrowers also have the choice of “bullet repayment,” which calls for repayment of the loan’s principle and interest at the conclusion of the period. The option on the list that best fits the borrower’s cash flow under the conditions should be chosen. People with limited financial flows, for example, will find that the non-EMI options, in especially the bullet payback option, are suitable for their situation in the present COVID 19 triggered lockout scenario. People with somewhat steady salaries, however, can go with the conventional EMI option.
Payment in advance (prepayment)
When a borrower chooses to pay off their gold loan early, the majority of lenders normally don’t impose penalties. Prepayment penalties of up to 2.25 percent of the total loan debt may be imposed by some lenders. Because the primary objective of prepayment is to lower the overall cost of interest on the loan, it is crucial to carefully evaluate prepayment fees before selecting a lender. The primary objective of prepayment is to lower the overall amount of interest owed on the loan. Verify that any prospective prepayment penalties are outweighed by the overall amount of interest you will save by paying off your loan early.
Also, the amount of a gold loan that can be secured greatly depends on the type and grade of the gold that is pledged. Generally speaking, any sort of gold jewellery, accessories, or money can be used as collateral, though each lender will have their own specifications. When evaluating the gold that has been committed, the muthoot gold loan may also utilise an internal valuation system or external valuators. The sanctioned loan amount is established following an inspection of the gold that has been pledged.
So overall ensure to keep all these aspects in mind for a smooth approval of your gold loan application.
