India’s credit system is slowly moving towards recovery, with 22 million Indian customers applying for new credits each month after 2020’s economic decline. With the spike in gold prices, individuals can obtain adequate funds to meet their financial requirements. Therefore, it is an ideal time to opt for such secured loans with the different emerging gold loan schemes.
However, before going forward, there are certain intricacies individuals should be aware of.
Things to consider before applying for secured loans
Since these credit facilities are protected by collateral, borrowers get to obtain a sizable amount against them. In case they fail to repay the amount, lenders can still recoup the loss by seizing the pledged assets.
However, the loan amount varies across different lenders, depending on some key factors. Here are some of these aspects an individual should be aware of before choosing any of the secured loan variants.
Loan-to-value ratio
LTV signifies the loan amount an individual will be able to acquire against the asset pledged as collateral. However, this ratio varies from one lender to another and usually ranges from 65% to 90% of the total gold value.
So, before applying for an online gold loan, potential borrowers can check the LTV ratio offered by their chosen lender and calculate the amount receivable. A higher loan-to-value ratio is inevitably beneficial as borrowers get to obtain a sizable amount as well as negotiate for lesser interest rates.
Interest rates
Even though the interest rates are pretty affordable in case of secured loans, associated factors like repayment terms, borrower’s credit profile, etc., often influence these rates. Lenders often levy higher interest rates on high-value loans; however, a decent credit score with a clean repayment track report can also help negotiate these rates.
As a matter of fact, among all secured loan variants, gold loans come with lesser interest rates. Since the repayment tenor for such credit facilities ranges from 12 to 48 months, borrowers can easily opt for a longer repayment tenor to reduce interest rates.
Additional Read: 4 Tips For Getting Your Business Loan Approved
Additionally, financial institutions often provide attractive gold loan schemes where you can get the best combination of tenor and interest rates, including higher LTV.
Repayment methods
While applying for any kind of secured loan, make sure to check all the repayment methods your preferred lender is offering. Since these credit facilities involve obtaining a large sum, it is expected that borrowers will look for flexible repayment methods to make the process more convenient.
In case of gold loans, borrowers get the freedom to choose the bullet repayment option. They can also repay the interest amount as easy EMIs and pay the principal amount at the time of maturity.
Some financial institutions impose additional charges if the loan amount is not paid in the traditional way. On the other hand, reputed NBFCs like Bajaj Finserv provide relaxations under their best gold loan schemes. With Bajaj Finserv, you can make part-prepayment or foreclose your gold loan without having to pay additional charges. While gold loans are easily available, borrowers may also falter while applying for them. Therefore, detailed knowledge about gold loans and the nuances associated with the LTV of a loan is necessary to move forward with the loan application. One can enjoy a hassle-free loan application experience by following these above-mentioned pointers.
Eligibility
Unlike unsecured loans, these gold loan eligibility criteria are lenient as these are obtained against collateral. However, some basic eligibility parameters like credit history, monthly income, job security, etc., get assessed by the lenders.
And, in the case of gold loans, lenders evaluate the purity of your pledged gold as well and offer the loan amount based on that. In order to be eligible for the best gold loan schemes, make sure the purity of your gold assets is between 18 and 24k.
Such measures are further boosting the Indian gold loan market, with more individuals applying for this form of credit by pledging their gold ornaments and supporting themselves during crisis situations. Also, the emergence of different gold loan schemes has been beneficial for potential borrowers due to the availability of flexible tenor and affordable interest rates. Considering all these benefits, it seems like an ideal time to opt for such secured loans.
