Regardless of one’s financial situation, most Indian families own some amount of gold. Besides its ornamental value, people use gold as an asset to avail money in times of need. Additionally, the competitive gold loan interest rate has made this secured form of credit popular amongst borrowers in India.
Here, we are going to see the ways to obtain the best gold loan interest rates. Continue reading to know more about the same.
Tips to Obtain the Best Gold Loan Interest Rates
Willing borrowers can follow these tips in order to get the lowest interest rate for a gold loan:
- Compare multiple lenders
Comparing multiple lenders is one of the simplest ways to obtain the lowest gold loan interest rates. Prospective buyers can also take the help of a gold loan calculator for this purpose. It will assist in calculating the overall interest payable for a specific tenure and loan amount.
One can follow these steps to use a gold loan EMI calculator:
Step 1: Visit the official website of any reputed lending institution.
Step 2: Locate the gold loan calculator option and feed in the loan amount, interest rate and desired repayment tenure.
Step 3: Then, provide the details of the pledged gold, tenure and interest rate.
Step 4: Finally, click on ‘Calculate’ to know the total interest payable.
This online tool allows users to compute multiple interest rates offered by several lending partners and helps choose the most feasible option per their financial capabilities. Almost all leading lending institutions offer this customised tool for free.
- Pledge high-purity gold
The interest rate on gold is also based on the purity of the yellow metal. Lenders will accept 18 to 24-carat gold ornaments, where 24-carat gold ornaments are levied with the lowest interest rate from lenders. This is because gold with higher purity has a higher market value.
Further, borrowers should be aware that gold bar coins cannot be used as collateral for gold loans. To be eligible for the lowest interest rate, one must pledge genuine gold jewellery that is free of other metals.
- Meet eligibility parameters set by lending partners
You must meet specific eligibility requirements in order to apply for a gold loan, whether it be offline or online. Knowing the lender-specific qualifying parameters for a gold loan helps you receive the best rates because the criteria for gold loans differ from lender to lender.
Here are some of the basic eligibility parameters to apply for gold loan in India:
- Applicants should be Indian citizens
- The age of applicant should be between 21 to 71 years old
- Applicant must be a self-employed individual /a salaried employee/ entrepreneur/ farmer/ trader
Nevertheless, unlike other credit facilities, the CIBIL score of the applicant does not play a vital role while applying for a gold loan.
- Submit all necessary documents
In addition to being eligible, applicants must also produce a number of supporting documents, including proof of identity, proof of address, and proof of income. Low interest rates can be obtained by submitting the appropriate documents and paperwork as and when asked by the lending partner.
- Provide all income sources
Lending institutions determine gold loan interest rates by assessing the repayment capabilities of an applicant. Since anyone can apply for this credit, regardless of their job status, an applicant can assure lenders of timely repayment by providing proof of a stable monthly income. For instance, borrowers with a consistent and high monthly income are more likely to receive the lowest gold loan interest rates from lenders.
- Check the present market value of gold
Interest rate on a gold loan and the price of gold are both influenced by different macroeconomic factors. When the price of gold is high, people may typically get a high loan amount. Due to the high value of the pledged gold, lenders also offer lower interest rates as it lowers the lending risks.
- Evaluate the inflation level
Similarly, gold loan interest rates also depend on the inflation level. In an economy with significant inflation, the cost of goods and services, including gold, increases. Because of the high price of gold at such a time, lenders will provide reduced lower rates if one applies for a loan against it.
Regardless of the interest rates, applicants must assess their abilities to repay the credit before applying. Following these tips can help you get lower gold loan interest rates. However, you must ensure to repay the loan amount in a timely and disciplined manner to keep your pledged gold safe and to enjoy a hassle-free borrowing experience.