In India, gold is not only considered auspicious but is also kept as a security for rainy days. A gold loan is a secured loan, widely available through a hassle-free process and convenient repayment terms. To get a gold loan, apply for it with only KYC documents and meet your financial needs without having to sell your precious ornaments. Moreover, the documents required to avail of a gold loan are minimum, and there is no requirement for an income proof or credit score for it. However, the easy processing that a gold loan offers, may let you to overlook certain essential points. Here are some common mistakes you should avoid while making a gold loan application.
Common MistakesYou Should Avoid in Gold Loan Application
1.Being negligent of the repayment structure
A repayment schedule is important for every borrower. It should be flexible so that it does not cause undue stress. Gold loans are flexible in terms of repayment schedules. It allows you to make partial repayment or prepayment for loan foreclosure. You can make your gold loan easy with:
- Only interest EMI option to pay only interest as EMI
- Bullet repayment option to pay the whole amount with interest at maturity.
- Unaware of aspects of Loan to Value
Every lender has a fixed Loan to Value (LTV) ratio. It can be as high as 75% for a gold loan. Apply after considering all parameters. Generally, a gold loan sanction depends on the purity and quantity of your gold to be pledged. It may differ for different lenders. You should go through them to maximise the loan value against gold.
2. Not understanding your gold requirements to be mortgaged
You may not be aware that lending institutions are permitted to grant gold loans against gold with a minimum purity of 18 karats. You should evaluate the purity of your gold before applying for a gold loan. Apply for a loan against jewellery of higher purity for a higher loan amount. You should know that the value of gemstones added in gold jewellery is not considered to offer you gold loan quotes.
3. Unutilised Gold Loan Calculator
Leading gold loan companies offer online calculators for a gold loan. The calculator helps loan seekers understand how much loan amount can be sanctioned against the available gold with them. Using these free calculators, you can estimate your gold loan interest rate and EMI beforehand.
4. Unaware of Lender’s Credibility
You are going to mortgage your gold that may be connected to your emotional sentiments or inheritance value. It may be your life savings in the form of gold jewellery. Not checking the lender’s credibility and reputation in the market is a major mistake that loan seekers commit while applying for a loan against gold. It increases the risk for your gold asset’s safety.
Thus, whether it is about urgent funds due to an emergency or a temporary financial crunch, you can utlise the locked in value of your gold. Make sure you choose only trusted institutions like Muthoot FinCorp that have 134+ years of experience and several gold schemes.