Major financial organizations have been providing loans to customers since their inception. These organizations, namely banks and Non-Banking Financial Companies(NBFCs) and making transactions and holding accounts, lend money to people for general and specific reasons. Gold loans, personal loans are general loans, and car loans, home loans are specific loans besides many. A gold loan is sanctioned based on the gold pledged as collateral for a certain period. The loan amount is to be returned at the end of the loan term with interest for the loan acquired.
The money can be used for any reason, be it medical emergencies, business projects, construction works, vacations, weddings, education, or scientific purposes. The lender doesn’t raise a single question regarding it. Therefore, the loan is highly versatile and has the maximum beneficial features. A gold loan has certain unique features that make them different from other loans. For example, most loans only have a fixed loan amount or loan to value ratio of 80%, but a gold loan’s LTV is 90%, and it goes as high as Rs 1 crore in most banks and NBFCs and is unlimited in many others. The loan amount depends on the purity of the gold article and the weight of the gold.
The purity must be between 18 carats and 24 carats. The gold rate of that day and also adds a certain amount to the value of the gold. The loan is granted for a certain period, and that period is known as tenure or loan amount. Tenure is the most important aspect in gold or any other loan for that matter as you will be paying the interest amount until it ends. Choosing a suitable tenure is even more necessary, as your income level and spending value depend and vary until that time. The bank or NBFC demands interest for as long as the tenure goes, and the principal amount remains unpaid.
How to choose a suitable tenure ?
First and foremost, know your monthly income. Secondly, create a rough plan for your spending and other payments. Third, know how much interest you can afford to pay every month and, depending on that, choose the tenure based on that using a gold loan calculator. Interest rate and tenure are co-related concepts, the interest depends on the tenure and loan amount, and the tenure depends on the interest.
A long tenure has a low interest rate every month, and a short tenure has a high-interest rate each month. But generally, it is said that the total interest amount on a long tenure is higher than that of choosing a high-interest rate with a short tenure. But, you should know your capacity of payment before choosing the number of months. Failing to pay interest amount continuously for more than one month leads to paying interest on top of the existing interest. For more than three months of succeeding payment, default leads to auctioning your gold by the bank or NBFC as the loan is secured and the lender has the right to do so.
The Gold Loan Interest Rate is a minimum of 7% per annum and a maximum of 20% per annum. The tenure of the gold loan varies from 3 months to 3 years in most banks and NBFCs. A processing fee is incurred to process and approve the gold loan application by the bank or NBFC. The charge is NIL in a few banks and financial institutes and 1% in a few others. The preclosure or foreclosure charge is procured if and when the borrower closes the loan account before the tenure ends. The charge-like processing fee is mostly NIL, but a few banks and NBFCs charge up to 1% of the outstanding loan amount.
Conclusion :-
Axis Bank Gold Loan provides all the best deals in the market with the most amazing and luring features. The bank has billions of customers worldwide and is eminent for its pleasing and heartwarming services.
Also read this: Why Choose only choose the Gold Loan