Gold Loans have developed as one of the most dependable and reliable sources of finance developing into a viable and attainable means of development of financial infrastructure in the country providing people with adequate financial resources so that they can leverage their financial activity bringing about improvement in the financial infrastructure of the country.
However, while taking a gold loan you should be aware of the repayment criteria of the loan since timely repayment will ensure that you can maintain a civil cordial relationship with the banking authorities and use that relationship for future transactions when you would require the loan amount to either start a new business venture or pay off your set of existing liabilities to other banking sector organizations.
For this, you need to be aware of the different methodologies which are adopted for repayment of the gold loan amount:
Payment in Lump-Sum Amount:
The first method of payment of the gold loan amount is through the mechanism of a lump sum payment system. This means that while repaying off the loan amount you return a significant portion of the loan amount in lump-sum and you pay off the rest amount of the loan in the form of monthly instalments along with the requisite interest charges that are levied In the gold loan eligibility facilities according to the percentage mandated by the guidelines issued by the banking authorities. For example- you have applied for a gold loan of 20 lac from ICICI Bank.
While applying for the loan amount you have deposited gold jewellery and ornaments to the banking institution which have been valued at 25 lac and based on the valuation of the gold that you have deposited to the banking authorities as collateral security deposit you have been granted the opportunity to avail the facility of the gold loan which is worth 25 lac.
While repaying this amount of the HDFC gold loan process within the gold loan tenure which is mentioned in your contractual agreement with the banking authorities, you can opt for the option of a lump-sum payment or downpayment mechanism. In this system, you can pay off a significant portion of the loan suppose say 40% of the loan of 20 lac which comes up to an amount of around 8,00,000 in lump sum payment mechanism, and the rest of the amount could be payable in monthly instalment systems along with the existing rate of interest.
Monthly Instalment System:
The second methodology of repayment of the gold loan amount is through the monthly instalment payment mechanism whereby the amount of the loan which is not payable as a downpayment is divided and segregated into different small amounts which will be payable monthly by the borrower compounded annually by the monthly charges of interest rate that can be imposed on the gold loan.
The monthly instalment system is feasible for small-time businessmen who do not possess much funds and liquidity measures to regulate the obtained amount of credit in the market and thus they are dependent on the monthly instalment system and the interest that is payable on a monthly system that would be payable by the borrowers. This system also maintains the regularity of transactions and maintains the perfect flow of credit between the financial instruments of an economy.
Conclusion
Therefore, the repayment of gold loans within the specified time is important to maintain a proper credit relationship between the borrower and the banking authorities. If you have any query regarding the gold loan, drop down your concern in the comment section and our executives will get back to you with the logical solutions.
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