When it comes to taking a loan, there are various options available in the market. You can take a personal loan, home loan, car loan, or even a gold loan. Gold loans have recently become quite popular because of the low interest rates and flexible repayment options. In this blog post, we will talk about all you need to know about gold loans! So, let’s get started.
What is Gold Loan?
Gold loans are secured loans where you use gold as collateral to get a loan from a lender. The amount of loan you can get will depend on the value of your gold and the lending institution’s policies. Gold loans are popular because they offer several advantages, such as low interest rates, easy to obtain, and flexible repayment terms.
How Does Gold Loan Work?
When you take out a gold loan, the lender will appraise your gold to determine its value. They will then give you a loan based on a percentage of the appraised value. For example, if your gold is valued at Rs. 1 lakh and the lender offers a loan-to-value ratio of 80%, you can borrow Rs. 80,000. The borrower needs to repay the loan, plus interest, over the agreed-upon tenure.
What are the Benefits of taking a Gold Loan?
There are several reasons why you might want to take out a gold loan:
- You can use the loan for any purpose, whether for business or personal use.
- The gold loan rate of interest is typically lower than those of personal loans or unsecured loans.
- Gold loans are easier to qualify for since they’re based on the value of your collateral, not your credit score.
- You can get a gold loan quickly, often within 24 hours.
Who can Apply for Gold Loan?
Individuals above the age of 18 years and with gold in the form of jewelry or coins can apply for a gold loan. You will need to pledge your gold as collateral with the lender to avail a loan against it. The loan amount you can avail of will depend on various factors such as the value of your gold, your income, and repayment capacity, etc.
What is a Gold Loan Tenure?
A gold loan’s tenure is the period during which you can borrow money against your gold collateral. The typical tenure for a gold loan is 12 months, but some lenders may offer shorter or longer terms.
How to Calculate Gold Loan Interest?
You can use a simple gold loan interest rate calculator to calculate your interest. The gold loan interest rate calculator will ask for the following inputs-
- The loan amount
- The tenure of the loan
- The interest rate
The gold loan calculator can calculate your monthly installments (EMI). The EMI is the monthly amount you will need to pay to repay your loan. The gold loan calculator will also show you a breakdown of your EMI’s interest and principal components.
How can you Repay the Gold Loan?
The repayment of the gold loan is very simple. You can repay the entire outstanding amount any time during the loan tenure. No prepayment charges are levied on part or full repayment of the loan. Usually, banks offer two types of repayment options – EMI and bullet payment.
Under the EMI mode of repayment, you have to pay a fixed sum of money every month till the end of tenure, along with interest charged on the principal outstanding. In the bullet payment option, you can repay the entire outstanding amount in lump sum at the end of tenure. This type of repayment is also known as ‘ballooning’ your loan.
The Bottom Line
Gold loans are a great way to get quick access to cash when you need it. However, it’s essential to understand the terms of your loan and calculate the interest rate and monthly payments before taking one out. Use a gold loan calculator to help you determine how much your loan will cost.
