The interest rate applicable on any loan directly impacts the repayment amount for that loan. Interest rates are determined by a number of factors, including monthly income, credit history, employment status and more. While applying for a gold loan, factors such as monthly income, credit history, employment status and more are taken into consideration to determine the interest rate.
There are several reasons why a lot of Indians prefer to invest in gold. Firstly, they can count on it during a financial crunch, and secondly, they can sell off their ornaments at any point in time to arrange cash. Gold loan is one of the quickest ways to arrange cash by utilizing your gold assets lying idle.
It is important to note that in case of taking a gold loan, the interest amount charged on the gold loan is linked with the prevailing gold market per gram rate and not linked with the daily interest rate charged by the lender. The repayment period of a gold loan depends on how much amount you are willing to take as loan and also depending upon the terms offered by the lender.
Things To Know About Gold Loan Interest Rates
- Compound Interest: Gold loans are like any other kind of loan. You will find that most lenders charge interest on an annual or monthly basis until your whole loan amount and the interest is paid in full. This means that you pay interest on the original amount you borrow plus all accrued interest. Yes, this includes any remaining interest that has not been paid in full. This method of calculating interest is called compound interest or compounding of interest and the industry standard, unless otherwise stated. Most customers assume that they will pay only simple interest which is not the case.
- Fluctuating Interest Rates: Gold loans are an option to get quick cash when you need it the most. There are many gold loan companies available in India and your choice should be made on the basis of interest rate, tenure and other conditions. So if you want to get rid of financial problems quickly, then go for a gold loan that is charge less or with nominal interest rates. And make sure that there are no hidden charges in the form of any additional interest rate hike.
- Fixed Interest Rates: Fixed interest rate is an investment option that guarantees the same interest rate for the entire duration of the investment. This means, your principal and accumulated interest will remain the same throughout the period of your investment. However, this should not be confused with paying fixed amount every month as it instead charges on your overall outstanding balance which includes both principal and accumulated interest.
- EMI: Banks charge EMI on gold loans or credit cards. Banks levy penalty charges if you skip EMI. Gold loan is a good option but not when your income is limited or may change in future, as you may have difficulty in continuing to pay EMIs
- Penal Interest: A penalty interest is charged by banks on a monthly basis as well as at the end of the tenure of your home loan. If you have not repaid money even after your tenure is over and get a new line of credit for another home loan then you will be charged penal interest as well. This may be charged as additional interest or it can be a part of your principal every month.
To avail a gold loan, the bank or NBFC will ask you to provide various documents. Documents normally required include your proof of identity such as PAN and Aadhaar etc. and proof of address like Aadhaar, passport and voter-id card etc.
Choose a Reliable Bank for Your Gold Loan
When you choose a lender, whether you are buying, selling or refinancing jewellery, you should be assured that you have the right options at the right time and that your jewellery will be safe. A good lender will offer attractive interest rates and flexible repayment options while ensuring safe custody of your jewellery. They should also provide clear terms and conditions of their services in detail. If required, always compare their interest rates to get the best deal. Muthoot Fincorp offers Gold Loan at attractive interest rates.