A gold loan is a secured loan taken by the borrower from a lender by keeping their gold items within a range of 18-24 carats as collateral. The gold remains on the books of the gold lender, and the lender holds back the market exposure risk arising from the variations in the market price of gold. The gold pledged as an asset may be on-sold by the borrower. People usually avail gold loans in cases of urgent monetary requirements. Once the customer repays the principal amount and the interest charged on the gold within the tenure given and as per the assigned gold loan interest rate, the gold would be given back to them.
The loan amount provided is a certain percentage of the gold, typically up to 80%, based on the current market value and quality of gold. The Reserve Bank of India (RBI) today, via its regulatory statement, announced that banks can now lend up to 90 per cent of the gold ornaments value, up from the existing limit of 75 per cent. The loan amount to be provided depends on many factors like-
The contemporary market value of gold.
The credit history of the borrowers and the financial facilities they can avail themselves of.
Weight, amount, and quality of the gold articles pledged.
‘Now that we know almost everything there is to know about gold loans, here are 4 ways you can repay a gold loan you’ve opted for, which is regarded to be a loan policy that abstains from stringent repayment schemes.
1. Partial Payment:
The first and foremost option is the most traditional repayment option of partial payment. By using this method, partial payments of the principal amounts and the interest on the gold loan can be made by an individual. This method of payment is quite advantageous as the individual can significantly reduce his total interest payout by paying back the principal bit by bit at the beginning.
2. Repayment with EMI:
The most widely known and convenient mode of gold loan repayment is through regular monthly EMI Payments. There are two modes of payment with EMI, as discussed below.
The regular EMI option provided by gold loan policies is a very convenient and popular repayment method, especially among individuals with monthly. This repayment method is aimed at those who receive a fixed amount in their bank accounts every month, either through paychecks or some other investment mode. The EMI option facilitates the payment of both the principal amount and the interest- both the payments tied together have to be paid off.
The second method is a little different from the first method. Whatever interest on the gold loan is found to be calculated, the borrower can pay through quite a few easy instalments. On the other hand, the principal amount can be paid back to the lender by the time the loan’s maturity date arrives.
One thing you need to keep in mind is that the principal amount is to be paid back in the entire amount as payments in instalments are not allowed. The main perk of the second method, that is, separate repayments of the principal amount and the interest, is that the weight of huge EMI every month is avoided, which might be difficult for certain people to start with. It’s because the principal amount can be returned at the end of the loan tenure and, as a result, doesn’t count as a part of the large EMI payments.
3. Bullet Payment:
Bullet Payment is an amazing repayment scheme that entirely removed the hectic concept of monthly EMI payments. All that needs to be done by the consumer is- repay the full due amount, including the principal amount and the interest. Thus, it eliminates the hassles of making some payments on a regular basis.
But one point that needs special mention is that the interest is calculated monthly, which has to be paid back at the end, which can make it a huge amount. So, if you do want to opt for bullet payment, make sure there is an abundance of the lump sum of cash required at the end of the loan tenure. If there is even the slightest possibility of a not-so-stable financial condition, don’t avail bullet repayment options.
4. Overdraft Accounts:
This is a repayment method offered by several banks viz. State Bank of India, DCB(Development Credit Bank) et cetera. These types of accounts avail transaction facilities, and interest needs to be paid for every withdrawal from the account to repay the gold pledged at the bank. In an overdraft, money can be repaid to the bank, both fully and partially, whenever the borrower wants to. After repaying the said amount of money off, the applicant can again withdraw money from the pre-existing overdraft account as per the requirement until the maximum limit of the overdraft is reached.
Now that you know about the four modes of gold loan repayment, communicate with the bank or lending institute of your choice or go through their official website to apply for a gold loan online at MyLoanCare.