Precautions of Gold Loans

 In India it has always been a popular way of fulfilling the cash crunch situations with the help of Gold Loans. Gold loans fall in the category of secured loans and are provided against gold articles. Apart from buying gold for sentimental reasons people also buy gold as it is easily liquified or can be used as collateral to take loans in times of financial contingencies.

It sure is true that interest rates for gold loan are lower than those of personal loan. But there are other factors too affecting the different loans in India. Below are some precautions to be taken before availing gold loans :

1. Value of Gold: Before applying for gold loans the borrower must know the value of his gold in the present market. Any individual can get a loan against gold upto 60%-75% of the market value of gold articles depending upon the purity of the gold.
   
   
2. Loan Amount: As mentioned in the last point , the borrower can avail upto 60%-75% of the gold value of his/her gold articles in the present market. However, the method of evaluation can vary from one lender to another which also determines the highest value a borrower can get against his loan articles.
   
   
3. Interest rate: The gold loan interest rates are always less than that of personal loans. But an efficient amount of research can bring knowledge to the borrower that how can he achieve lowest possible interest rates from the multiple lenders in the market. Any borrower can reach out to two types of lenders in the market and that are bank or NBFC.
   
   
4. The Credibility of the lender: Any individual looking to apply for a gold loan should first check the credibility of the lender as it is with the lender with whom the borrower pledges the gold articles till the time he uses the loan amount. Hence, it is of utmost importance that your gold is in safe hands. The procedure of gold loans does not require much paperwork as the pledged collateral is gold and the bank or any other lender is at minimum risk because the gold articles can be liquified anytime to recover the defaulted payments.
   
   
5. Purpose and Tenure of the loan: Many people get attracted towards gold loan due to its less interest rates and easy availability but it should be noted that the gold loans should not be availed for risky purposes. Also, the tenure for gold loans is comparatively shorter than other loans i.e. around 12 to 15 months.
   
   
6. Repayment Terms: Every lender has his/her own designed repayment structure. Some lenders allow interest payments every month and the principal amount can be paid at the end of the tenure.
   
   
7. Other associated charges: Any individual should be aware of the additional charges associated with the loans. Same is the case with gold loans. There are processing fees, documentation fees, etc. Also there are penalties that can be imposed upon during the payment tenure.