Loans come in two varieties, secured and unsecured. Unsecured loans, like personal loans, are made without the use of any kind of security. A secured loan, such as a loan against gold, is secured by collateral. These loans are believed to be less expensive than unsecured loans because the lender has security or collateral against them. You must use your gold items as security to obtain a loan from a lender. Typically, a set portion of the entire worth of the gold you have placed is sanctioned as the loan amount. A gold loan process is more accessible than any other loan type. The interest rate on a gold loan generally ranges between 9.50% to 28%, depending on the lender you choose. These loans are typically available for a duration of six to twelve months. You can have your gold jewels back if you repay the entire amount on time.
Gold loan is very popular at the current time. You need to take care of certain factors in the gold loan process. The following mistakes should be avoided while requesting a gold loan.
- Not checking the lender’s credibility- Consequently, it is essential to research the lender before applying for a loan. Choose a lender who will protect your valuables and avoid fraud traps. It is usually preferable to choose a business that the RBI regulates.
- Not exploring other gold loan options- Many NBFCs already provide gold loans, each with special incentives for borrowers. Examine and investigate the benefits and peculiarities of as many lenders as you can, then contrast their offers.
- Pledging any gold items for the loan- Only gold with a specific carat value is valued as valuable collateral by lenders. You must review the eligibility requirements online or in person at the lender’s branch to determine whether the gold asset is suitable.
- Ignoring interest rates- Individuals who lack experience or information frequently begin taking out gold loans without considering the interest rates. In the long run, this could represent a considerable financial burden. It is therefore recommended to pick a gold loan with a fair interest rate that won’t strain your funds.
- Not knowing your EMI alternatives- By failing to look into the available repayment choices, you can select a gold loan strategy that puts pressure on your resources. Check your loan repayment options before submitting your gold loan application.
- Wrong mode of repayment- Choose a repayment option that allows you adequate flexibility and won’t penalize you severely if you skip a few cycles of payments.
- Ignoring hidden charges- Avoiding the hidden fees may end up costing you in the long gold loan process. You should always consider these hidden fees before you sign the final agreement.
- Wrong tenure or repayment- One of the worst mistakes you can make when taking out a gold loan is choosing a longer term at a higher interest rate. Carefully determine the proper EMI for the reasonable repayment period.
- Terms for auction- Auction is one of the famous gold loan features. The terms and circumstances for the auction should be clarified directly at the beginning of the agreement.
- Neglecting after-sales service- Although it may seem unneeded initially, you will experience difficulties during the payback period. And you will need the support of your gold finance firm. Know everything about the after-sales service before taking a loan.