Mistakes to Avoid While Taking Gold Loan Online
Every Indian household holds a strong emotional attachment to gold. It is regarded as an auspicious element during the time of festivals. Gold, other than being a beautiful piece of jewellery, can also be used during the time of financial emergency. Most banks and NFCs in India offer gold loans to people. It is simple to avail and it does not require a lot of documents. You can either visit your bank branch while applying for a gold loan or you can apply gold loan online. Either way, gold loans are the most secured form of a loan.
Despite its simplicity and quick disbursal, there are some regular mistakes that people make while applying for an online gold loan. Here are some mistakes that you must avoid when you apply gold loan online or offline. But before getting into the mistakes, let’s understand gold loans a little better.
What is a gold loan?
The gold loan is a secured loan that one can get when they offer it to the lender as security. As a result, gold jewellery, coins, ornaments, or bars are acceptable as loan collateral. The lender determines the market worth of the pledged gold item based on its purity and current rate. As a result, the LTV (Loan to Value) is fixed, and the terms and conditions are tailored to your financial situation and preferences. Finally, following approval of the terms and repayment conditions, the loan is issued and deposited into your account.
Mistakes to avoid while applying for a gold loan
Let’s now look into the mistakes that one can make while applying for an online gold loan.
Not comparing other options
Almost every bank/NBFC provides competitive and appealing gold loan solutions to individual applicants. Do not choose the first choice because it may not be the best option for you to opt. So, prior to settling for the available possibilities, it is best to research different lenders/NBFCs. Also, learn about their offerings before submitting your loan application online. Choose a bank/NBFC that gives you a cheaper interest rate or a greater LTV ratio. Furthermore, before choosing a lender, make sure to read the tiny print.
Not assessing the lender’s credibility
When asking for an online gold loan, you must promise your gold jewellery to the bank/NBFC to obtain the loan. Because it is a secured loan type, your ornament remains with the bank/NBFC until the loan is totally repaid. As a result, the risk is on you rather than the lender party. So, prior to applying for this loan, do conduct a comprehensive background check on the lender/NBFC for sure. For gold loans, it is usually best to go with a reputable lender/NBFC. Any firm that the RBI monitors is always a better fit for you.
Not knowing how to calculate the LTV ratio
Lenders utilise the LTV ratio to assess the worth of your pledged gold, on which they base the loan amount, which should be between 75 and 77 per cent of its entire value. Always keep in mind that the more the Loan To Value ratio, the greater is the risk involved. Borrowers must evaluate the LTV ratio before taking out an online gold loan and greater amount.
Failing to understand the repayment schedule
Understanding the repayment schedule of gold loans is crucial for your financial planning to avoid default. Often gold loan providers give 4 options to choose from. They are:
You repay the collected gold loan interest in EMIs during the loan term and the complete principle in one single amount at maturity. The repayment arrangement is cost-effective because the EMI is low.
The most typical repayment arrangement is best for employees with a consistent revenue stream. The EMIs, which include both principal and interest, is paid over the life of the loan.
The arrangement is most appropriate for businessmen that want to borrow money. You return the principal and interest in instalments at your leisure. In the process, you save a lot of money on interest payments.
At the conclusion of the term, you repay the loan in full, including the collected interest and principal. Because interest is levied monthly and accumulates until maturity, the fund’s cost is greater.
Unaware of hidden charges
Banks frequently conceal a slew of fees in the “Terms and Conditions” section. These hidden expenses include processing fees, auction-related charges, foreclosure charges, and late payment penalties. So, when applying for an online gold loan, always make an effort to learn about all of these hidden fees.
So, next time when you wish to seek a gold loan online try to avoid these aforementioned mistakes. Nowadays, many banks and NBFCs also provide gold loans in real-time via dedicated applications. Thus, for a gold loan apply online checkout their app-specific conditions for a hassle-free outcome.
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