new Delhi: The practice of gold loan has always been with us, the only difference is that earlier local businessmen used to give loans and now corporate houses give loans on your gold. Many times people make some such mistakes while taking gold loan due to which it becomes very difficult to repay the loan. Let’s know about some such common mistakes, which can be overcome without taking advantage of the gold loan-
Comparison of interest rate Before taking a gold loan, one must compare the interest rate on gold loan. In fact, on gold loans, some lenders charge interest from floating and some fixed rate. In such a situation, a little research work is necessary for you. Interest on gold can range from 8.85% to 29% per annum. According to RBI, LTV ratio means loan to value ratio can be up to 75% of the price of gold. Higher LTV ratio means higher risk of loan. In such a situation, to avoid high interest rates, choose the lender who charges low interest rate on high LTV ratio.
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Make EMI carefully- The duration of gold loan can be from 7 days to 4 years. The loan term should be chosen based on its repair capacity.
Pre-payment charge not checked Most lenders do not charge pre-payment fees in case of gold loan. The main purpose of pre-payment is to save the interest expense. When taking a gold loan, choose a lender who charges a minimum or zero pre-payment fee.
Processing Fee – Lenders charge processing fees based on the loan amount. It is usually 0.10% –2% of the loan amount. Processing fees are also high when the loan amount is large.