A gold loan or the loan against gold is one of the most useful and economical credit tools that can be used to avail of quick funds with minimal documentation and an affordable cost.
The major part of the cost is usually the gold loan interest rate, but many times there are certain extra costs attached to the loan facility.
Some costs are the following such as:-
Processing fees-
Financial organizations (banks and non-banking financial companies) endure the administration costs to assess the application and evaluate the collateral. The lender spends a lot of time and effort, deploying their resources while sanctioning the gold loan. The processing charge is charged on the total credit amount sanctioned disbursed.
Inspection and documentation charges-
The lending organization (banks and non-banking financial companies) goes through the documents to confirm if the borrower is qualified and has the repayment capacity. For the gold object pledged, the lender sometimes has to call in an expert / professional to verify the collateral's quality and quantity. For that, they incur some expenses, and these expenses will be recovered from the borrowing individual or entity. As far as documents are concerned, they are primary KYC documents, and thus, for the papers, not many expenses are incurred, the amount is nominal.
Late payment charges-
Some financial organizations (banks and non-banking financial companies) charge modest fees from the borrowing individual or entity when they make delays in the payment of personal loan amounts. In case the borrowing individual or entity pays after the specified date per the agreement, the lender will charge this penalty.
Preclosure charges-
Suppose a borrower has an overabundance of funds and can foreclose the loan by paying the entire amount of the gold loan before the tenure expires. In that case, the lending organizations (banks and non-banking financial companies) charge a fee for their lost interest revenue and recover in the form of a pre-closure fee. Under City Union bank gold loan policy, the individual or entity has to pay a small fee for preclosure.
Counterfeit statement charges-
If a borrower requires a duplicate statement of the payment schedule or any other related information, the financial institutions charge fees and provide the borrower with the required detail.
Goods and Services Tax (GST)-
The Goods and Services Tax is charged for the borrower's services, including both regular and additional, during the application process. Unlike other fees, this will be charged irrespective of the choice of the borrowers.
The costs mentioned and discussed above are elective, except for the goods and services tax. It means that many lenders do not levy these charges, but as a borrower, an individual or entity should go through it sincerely and acknowledge it. Though in a gold loan, these costs are almost negligible. These costs are calculated on the total loan amount and can have a massive impact on the borrower's liability.
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