When running a family, many situations can arise in which you will require a loan to meet immediate expenses which are more than what your salary can cope with. It is during such circumstances that you apply for a loan. However, when doing this, care must be taken so that you find a lender with the lowest interest rate. This means your monthly repayments will be less; hence, the burden of repayment will not be heavy. Out of the many loan programs, one with a very low-interest rate is the gold loan.
What Is Gold Loan?
Gold loan is loan amount that can be availed by pledging gold assets. These can be in the form of jewellery or coins. When it comes to pledging coins, care must be taken to pledge only those that have been issued by the bank from which you are taking a loan as only this will be accepted. Furthermore, it is to be noted that only 18, 22 and 24-carat gold and nothing else can be pledged so check this up on your gold before taking it to the bank.
A loan that is availed by pledging gold carries with it a very low-interest rate. The low gold loan interest rate is what entices a lot of people to avail for pressing financial needs. Usually, the interest rate ranges from 9 to 14 percent of the loan amount. This rate varies from lender to lender, but generally, it is far lesser than what is seen in other loan products. As a result, taking it to meet expenses will not be very difficult to bear. The loan processing fees are also low, and the loan tenure varies between thirty to thirty-six months. You can also finish paying off the loan in just six months and become free from it.
Ways to Repay Gold Loan and Not Feel the Burden of Interest Too Much
Repayment of the gold loan can be done in different ways. You can opt for bullet repayment; wherein there is no amount given to the bank for the entire duration of the loan period, but at the end of it the entire amount is paid back. Another form of repayment is the EMI way which is preferred by salaried professionals as they can have the principle plus interest automatically deducted from their account each month towards the loan.
The amount would be fully repaid by the end of the loan tenure. You can also opt to pay only the interest every month for the entire loan period, at the end of which the complete loan value is repaid. Yet another means of repayment is by making partial payments at select intervals of the loan period. For example, you pay a lump sum plus interest at the end of six months, which is determined by you and the lender beforehand. This process continues till the entire loan amount is paid. After the loan has been fully paid, the banks will give back your gold assets.