5 Common Mistakes to Avoid When Applying for a Gold Loan
You can't compare the love that Indians have for gold. It has been a tradition in India to have gold ornaments in bundles. The gold jewelry in India is lying idle in the households. They are used as perfect investments in times of need. You can quickly get funds by pledging your gold ornament at any bank or financial institution.
A gold loan can be availed at any financial institution in India. You'll have to pledge your gold ornament at the bank, and the funds will be disbursed instantly. It is the easiest loan option available in the market today. You can quickly get funds without much hassle. Besides banks, a lot of financial institutions and NBFCs have started focusing on the gold loan sector. The complete approval process of a gold loan is very quick and easy. However, several things should be kept in mind while applying for a gold loan.
However, as there are a lot of perks and advantages that can be availed, people should still tread with caution. Here are some common mistakes that individuals must avoid while applying for a Gold Loan Per Gram facility:-
Check the creditor's/lender's credibility
A gold loan is a secured loan where you have to pledge your gold asset as collateral in a bank. The gold that you will pawn will be with the creditor until the loan amount is repaid. So it's essential to check the creditor's credibility before moving with the loan process. It's advisable to apply for a gold loan facility at an RBI (Reserve Bank of India) regulated bank as they are entirely transparent with their charges and will keep the gold ornament safe. A lot of individuals prefer borrowing funds
from a neighborhood jeweler, but there's a risk that they might change your original stones with fake ones. So it's advisable to pledge a gold ornament at a credible bank.
Not calculating the LTV Rate
The loan to value ratio is the percentage of the amount you will get by pledging your gold ornament. The standard LTV rate is 75% to 85%. This rate usually differs from one bank to another. During this pandemic, the LTV rate has increased to 90%, so banks can now give funds for up to 90% of their Muthoot Finance Gold Loan Rate. So it's essential to compare banks according to their LTV rate. Check the loan amount you need, and if your gold rate fully satisfies the loan amount, then you can apply for a bank that will give a similar LTV.
Customers are not aware of the hidden charges
Banks state all the charges and interest rates in the terms and conditions section. And a lot of financial institutions often hide those charges. These hidden charges can include foreclosure charges, processing fees, penalties on late payment, and auction-related charges. It is advisable to compare all the banks and then choose one that is completely transparent with their charges. Customers have the right to question banks regarding the charges that are being incurred.
Not putting much consideration on a repayment structure
Multiple repayment structures are offered by the lenders. A lot of individuals love to stick with the old regular EMI option. But customers have the flexibility to choose a repayment structure according to their income, budget, expense, and capacity. So you can explore all the options available in the market and then choose the right repayment structure for you. Four main repayment structures are given by every bank, and these are regular EMI, partial repayment, interest now as EMI, and Bullet repayment. So you can compare various options and then choose the right repayment structure for yourself.
Not being aware of the gold quality and quantity
During the evaluation process, the customer has to meet the minimum purity and weight criteria to get funds through the gold loan. The minimum purity required by the banks is 18 Karat. All the additional stones and gents will not be considered to decide the loan amount. Therefore, the actual gold in your entire ornament will be the only thing that will be measured. Your gold ornaments should not exceed 50 grams and must be 99.9% pure.
Also read this: Gold Loan in a monetary crisis