A gold loan, sometimes referred to as a loan against gold, is a secured loan that a borrower takes from a lender. The borrower needs to pledge gold jewellery or things made of gold to take the loan. Lenders typically approve you for a loan up to a particular percentage of the gold’s worth. You can pay it back in monthly instalments, and then you’ll get your gold items back.
There are no limitations on how gold loans can be used, unlike other secured loans like a mortgage or car loan. Therefore, it is a perfect way to fulfil your unexpected financial demand, whether it be for a wedding or your child’s education. In addition, many commercial and nationalised financial institutions provide a low gold loan rate. A gold loan has a lower interest rate than unsecured loans like a personal loan due to the fact that a gold loan is secured. Various factors, including the length of the gold loan and the loan amount, affect the interest rates charged on gold loans.
A gold loan is a type of secured lending that enables borrowers to get large sums of money in exchange for valuable gold jewellery. According to the RBI’s existing regulations, lenders may offer up to 75% of the value of the gold that is pledged. Lenders evaluate the market worth of your gold jewellery when applying for a loan because gold prices fluctuate frequently. You must find a lender offering the lowest gold loan rate to reduce the payback amount significantly.
Main variables affecting interest rates on gold loans:
● Monthly income-
Loan against gold have more specific and flexible requirements than unsecured loans. The lender specifies a few eligibility requirements when a borrower asks for a gold loan. A steady income lowers the gold loan rate that the lender charges in relation to the loan amount you want to take out. This is a result of the lender’s faith in your capacity to repay the loan. Conversely, greater interest rates can be applied to borrowers with lesser incomes.
● The market price of gold-
The value of the gold ornaments that have been promised will increase if the market price of gold is on the higher side. Additionally, the amount of the loan you can get depends on the value of the pledged gold jewellery. Lenders typically provide up to 75% of your gold’s total market worth. Lenders may provide attractive loan rates if the price of gold is high because there is little chance that they will lose money.
● Demand & supply-
The price of gold is influenced by supply and demand, just like any other market transaction of a good or service. However, only the gold that has been mined up to this point is offered on the market. This number is limited due to the relatively low annual global gold mining output. As a result, the supply does not increase when demand increases. This could lead to fluctuations in the price of gold. Finding a lender offering cheap interest rates on gold loans may be challenging. You can calculate your gold loan EMI with a gold loan EMI calculator.