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While gold loans are readily available, consumers need to tread with caution. Here are a few mistakes you should avoid when using your gold loan.
1. Not looking at your lender's loyalty
Gold loans, such as secured loans, should be relatively easy compared to options such as personal loans and require less paper. Your debt and creditworthiness requirements are usually not taken into account when obtaining a gold loan. A gold loan, however, can be good for the borrower if he uses a Gold Loan Apply Online as your gold is with the lender until the time you repay your loan in full. Therefore, it is recommended that you choose well-established banks and NBFCs only with gold loans.
2. Don't compare your options
Most lenders may be willing to take out a gold loan at a price that will be determined based on your gold price. As a borrower, you should never go for an initial offer. Shop around, know market trends and interest rates and decide on a lender. Look for a lender who offers low-interest rates or a high-interest rate loan (LTV).
3. Ignorance of repayment structure
There are four different types of fines that a lender can pay. It is very important to understand these frameworks and choose the one that best suits your needs.
- General EMIs This is a basic paid payment structure for low-income borrowers who enter into monthly payments. Like other loans, repayments will be made to EMIs that will charge interest and the principal amount.
- Partial payment Under this property, you are allowed to pay interest and principal fees as you wish and when. It is not necessary to adhere to the EMI schedule originally set. This is a customized payment system designed to suit customers. For example, if you pay a better part of the principal in the first place, you will have to pay less interest in the future.
- EMI interest only Under this scheme, the lender asks you to pay interest only as EMI and the principal will be paid in full on the due date. It is ideal for borrowers who are expecting a large amount in the form of FD or RD maturity.
- Bullet repayment You must pay in full and interest at the time the loan matures. There is no need to pay any EMIs during the loan period. Interest will be calculated monthly but must be paid in the end.
4. Ignoring nuances of the LTV calculation
Some of the borrowers should also understand how this bank easily calculates the value of your loans for borrowing purposes. For example, if the market value of your gold is Rs 2 lakh, you can get a loan of up to Rs 1.2 lakh. As a wise borrower, you need to have a positive view of the market value of your gold.
5. Not knowing the type of gold you can take a loan for
Banks that offer gold loans with a purity of 22 karats or more. So if you have gold that is not so pure, it may not help you. When making gold jewelry with other gems embedded in it, consider only the weight and purity of the gold in determining the value of the loan. But keep in mind that Indian Overseas Bank Gold Loan do not accept gold bars, nor do they accept gold coins or gold coins of more than 50 grams.
Conclusion: Additionally, as with all financial transactions, read and understand the terms and conditions before signing up on the dotted line. Please note that most lenders do not charge any prepaid penalties for gold loans so if your lender has such a situation, you should negotiate or look into something else.