One benefit of applying for a gold loan is that it is typically approved quickly, there are no restrictions on how, when, or where the money may be used, and the borrower’s cibil score is seldom taken into consideration. The fact that there are several ways to repay a gold loan is another point that is occasionally ignored or underemphasized.
If you’re curious, let’s find out.
The choice of bullet repayment
One of the most preferred methods of paying back a gold loan is the bullet payment option. It enables the borrower to pay back the entire loan amount at the end of the loan term, including the applicable karnataka bank gold loan interest rate on the gold loan. Lenders often get interest payments every month. Gold loans may have periods of three months to three years, despite the “bullet” option’s typical maturities of one year to three years. If you are unsure of how much of your loan you will be able to return each month, the bullet repayment option may be your best choice. The “bullet repayment” option has the greatest interest expenses because a gold loan requires repayment of both the principal and interest at the same time.
Exclusively covering the gold loan rate portion of a gold loan in monthly instalments
The principal of the loan is not payable until it has been fully returned, despite the fact that the interest is paid each month in accordance with the EMI schedule. During the term of the gold loan, the borrower’s obligations are restricted to making interest payments. If you don’t have the extra cash on hand or the steady cash flow to pay both the interest and the principle, this is your best choice.
The karnataka bank gold loan interest rate will go up if the borrower doesn’t make timely principal payments. Borrowers should consult their financial institutions about prepayment possibilities and, if any, associated costs before choosing this mode of loan repayment. As a result, the total amount of interest paid throughout the period of the gold loan would be reduced, and the principal might be repaid in full in one lump sum at the end/maturity of the goldloan’s term.
Just upfront payment of interest costs
The interest on the gold loan at the applicable gold loan rate must be paid in full at the time of loan disbursement under this repayment plan. At the end of the loan term, you will be obliged to repay the gold loan’s principal. Usually, interest is deducted from the principal balance that must be repaid when a loan is paid back. For borrowers who are aware they won’t be able to make monthly payments during the loan’s term but would like a more affordable solution than a single lump sum, choosing to pay interest up front is a reasonable compromise.
Regular EMI Gold loans typically offer the regular EMI payment option, just like most other loans do. EMI provides a lower overall interest cost than other loan repayment choices because principal and karnataka bank gold loan interest rate are paid back over the duration of the loan. For people who have a consistent income and spending plan, regular EMI may be the most advantageous option.
Also Check: Gold Loan Interest Rate
Which payment option should you use, then?
Those applying for a Go for Gold loan should pick a repayment plan that makes the most sense given their current financial situation and anticipated future earnings. Many people’s capacity to make a living has been impacted by the current epidemic, thus unconventional EMI repayment solutions, like the bullet payback option, can be helpful. The regular EMI option, which has the lowest gold loan rate, is the best choice for individuals who are certain they will have a consistent revenue stream.
Now that you are aware of your possibilities for paying back a gold loan, it would be a good idea to bear in mind these important considerations.
Total amount borrowed
According to the Reserve Bank of India, banks and NBFCs are only allowed to loan borrowers a maximum of 75% of the value of their gold. Most institutions offer loans in this category, with gold loans ranging from $1,000 to $10 billion.
The karnataka bank gold loan interest rate charged on gold loans depends on a number of variables, including loan-to-value (LTV) ratio, loan term, loan amount, lender perception of risk, and others. For instance, if the loan-to-value (LTV) ratio is high, the lender will probably increase the interest rate to offset the additional risk. The normal yearly gold loan rate range for gold loans is 7 to 29% (p.a).
Schedule for Repayment
The majority of gold loans have shorter durations, often three to five years. Choose a loan period that results in an affordable Equated Monthly Installment based on your financial situation (EMI). An online EMI calculator will assist you in calculating your anticipated monthly payment based on the loan amount, karnataka bank gold loan interest rate, and term you enter. As the loan period lengthens, the EMI amount decreases while remaining constant for shorter terms.
A fixed fee or a percentage of the loan amount may be charged as processing fees for gold loans. Others may charge up to 2% of the loan amount, while some lenders may levy a flat cost of Rs 10. You should take into account the processing fees the gold loan lender may demand before submitting your application. This fee, especially for larger sums, may have a considerable impact on the overall cost of a loan.
Value and authenticity of the gold
The maximum amount of the gold loan is determined by the purity and quality of the gold given as collateral. Gold jewellery, coins, and other adornments may be acceptable collateral depending on the lender; however, this is not always the case. The lenders also analyse the gold, either internally or by external evaluators, and base the loan amount on the assessed value and purity of the gold.
As a last point, remember that even if gold loans are popular in our country due to the popularity of gold itself, it’s crucial to keep all the previously mentioned considerations in mind to get the most out of your gold loan arrangement.