Getting a loan against gold can be an option that can help you get out of a financial tight spot. It is also a great way to diversify your investment portfolio. However, it is important to know a few things about the process before you get started.
Pre-closure fee
The pre-closure fee on gold loans varies from lender to lender. However, it can range from 1% to 3% of the loan amount. It is best to compare the fees of different banks before applying for a gold loan.
Gold loans are available at a relatively lower rate of interest compared to personal loans. There are several lenders that offer flexible repayment options. Some offer a repayment option where the borrower only pays the interest at the start of every month, while others offer a bullet repayment where the borrower only pays the principal at the end of each year.
The online repayment
You can apply for a gold loan online. Once you submit your application, you will be given a login ID and password. From there, you can follow the online repayment process.
You will be asked to provide various documents for verification. The loan amount will be disbursed into your bank account after approval. When you need money for a financial emergency, a gold loan can help.
Interest rates
The interest rates on loans against gold vary widely from one bank to another. This is due to various factors. For example, the size and value of the gold you pledge for your loan play an important role in determining your interest rate. It’s a good idea to compare the different lenders before you sign on the dotted line.
You should also compare the amount of time it will take for the loan to be sanctioned. The average tenure of a gold loan is six to thirty-six months. As the duration of the loan progresses, the balance owed goes down. Also, you should compare the pre-payment charges.
A typical processing fee for a gold loan is around three percent of the total loan amount. In addition to this, you should consider late payment charges. However, if you already have a bank account, you might qualify for a lower interest rate.
Generally, the higher the gold value, the higher the interest rate. Hence, if you have some gold to pledge, it may be wise to consider a gold loan rather than a personal loan.
Eligibility criteria
When it comes to applying for a gold loan, eligibility criteria can vary greatly from bank to bank. For instance, you might need to be a farmer, self-employed, or a salaried employee to qualify. Depending on the lender, you might also need to be over a certain age.
The overall weight of your gold will determine how much you can borrow. If you have jewellery that weighs 18 carats or more, you can pledge it for the loan. However, some lenders do not offer loans below 18 carats.
Loan calculator
In addition, you’ll want to check the purity of your gold. Higher gold purity means that you’ll be able to get a larger loan. You can use a gold loan calculator to find out how much you can borrow.
Other requirements that you’ll need to fulfill are your age, your credit score, your income, and your existing debts. While these requirements vary from lender to lender, they usually have similar requirements.
Loan against gold vs outright sale
In contrast to an outright sale of gold, a gold loan can be a quicker, cheaper way to secure money. The process of borrowing against gold is simple, discreet, and confidential.
Gold loans are a popular form of debt, particularly amongst high net worth investors (HNWs). These loans are backed by precious metals, which are deposited with the lender as security. They also have the advantage of offering a lower LTV rate than an outright sale.
Taking out a gold loan offers many advantages, including low interest rates, quick processing times, and a lower risk to the lender. If you are looking for a loan against gold, contact your local bank or credit union for more information.
Conclusion
There is no capital gains tax event when you borrow against gold, so you can enjoy the benefits of price increases without losing any of the metals you have pledged. However, it is possible that the value of your bullion may fall below the amount you are borrowing. It is important to remember that the value of gold and other precious metals is dependent on the economic and political environment.
