Gold is a globally celebrated metal with varied uses. Nowadays, people use it to overcome financial issues in their lives. It is kept as collateral with lenders to get quick and easy funds. Many banks and NBFCs (Non-Banking Financial Companies) offer gold loans. They keep your gold jewelry as security and lend you an amount of money in return. However, the best gold loan interest rates are calculated based on your pledged gold ornament’s purity and current market value.
What is a Gold Loan?
A gold loan is a kind of secured loan. There is no special requirement for a good credit score to get a gold loan. Therefore, it is an easy way of getting funds for one’s financial needs. The disbursal time of a gold loan is minimal. Moreover, the overall procedure to get a gold loan is hassle-free. Since you deposit gold as the collateral with the lender, the paperwork is seamless.
Benefits of Getting a Gold Loan?
A gold loan is believed to be an easy option to fulfill your immediate monetary requirements. You can go for a gold loan because:
- No credit history is required to be checked while reviewing the loan application. Also, you don’t need a fixed income to opt for a gold loan.
- It is a good credit option due to the cheap gold loan interest rate.
- Unlike other loans, you can use the gold loan amount for several purposes. Loan amounts procured from pledging your gold can be used to meet different financial needs.
- The disbursal time for a gold loan is minimum. Usually, the loan is processed faster than all other credit options. The loan amount is ready within a short time.
- You need to provide fewer documents as compared to other loan options.
- Many banks and NBFCs provide a flexible repayment tenor ranging from a few days to several months.
How is Gold Loan Interest Calculated?
Most banks and Non-Banking Financial Companies in India have gold loan branches that provide cheap interest rates and flexible repayment options.
Here is how you can calculate the highest gold loan interest:
- Log on to your preferred online portal offering a gold loan interest calculator.
- Enter the values for the loan amount, tenor, and rate of interest in the given boxes.
- Once you are done entering the values, wait for some time. The calculator will automatically calculate and display the interest rate on the right-hand side of the screen. You can also compare and decide by entering different interests and loan amounts to know which suits you.
Elements Influencing Gold Loan Interest Rate
The internal policies of banks and NBFCs decide the rate of interest on gold loans. But, there are certain factors too that affect the gold loan interests. These include
- Purity of the pledged gold
The higher the purity of the gold ornaments, the more loan amount you can procure. The lenders assess the value of the gold in the market before giving you the loan.
- The amount of the loan
Usually, a high-interest rate is charged for a large amount of loan. Various banks, too, have different interest rates pre-decided for different loan amounts.
- Relationship between the lender and the borrower
If you are an existing customer at a bank, you might be eligible for a gold loan at a cheaper interest rate. Therefore, the association with the lender via an FD, savings account, etc., may prove to be beneficial for you.
- Ability to repay the loan
Your income and assets to liabilities ratio help the lender assess your capability to repay the loan. If you have a good income with better repayment capability, the lender may charge you an affordable interest rate.
Points to Remember While Calculating Gold Loan Interest
You are given a loan amounting to only 75% of the gold you provide as security.
- The highest gold loan per gram is calculated based on the pledged gold’s purity. Therefore, the pure your gold, the higher the amount of loan you will get.
- Also, the loan is provided depending on the loan-to-value ratio or LTV. The highest gold loan per gram is calculated based on the current market value of 22-carat gold.
So, it’s important to know how to calculate the gold loan price today. Knowing the interest, you have to pay for a gold loan will help you plan your future financial requirements. Also, with the completion of loan repayment, you get your asset back.
Author : Vikas Choudhary