A gold loan is a viable option for individuals looking for funds to meet their financial requirements. It is a secured loan that an individual obtains by pledging gold for a certain period in the form of jewellery, bullion, or anything else. The loan amount is a percentage of the gold’s value and the market rate. Borrowers need to repay the borrowed amount along with the gold loan interest cost to get their secured gold back. Since the interest rates make a huge difference in the monthly instalments, here is how to calculate them.
Working of a Gold Loan
Taking a gold loan does not require individuals to sell their hard-earned gold assets. Instead, they can mortgage it for a short while to finance their emergency need and get it back after repaying the borrowed amount. Gold loan processing is similar to that of any other loan type. Firstly, the lender inspects the gold assets for weight and purity and decide its value to calculate gold loan per gram. Next, they ask for a few essential documents like identity proof, address proof, and income proof to sanction the loan. Once both parties sign the agreement, the lender disburses the loan amount, and the borrower takes the responsibility of repaying the loan EMIs.
Once the borrower pays the borrowed amount and the interest cost, they receive their gold back. However, if the borrower fails to repay the loan, the lender gets possession of the gold and sell it to get their money back. ankara travesti
Factors Affecting Gold Loan Interest Rates
These are the most important factors that lenders use to calculate interest rates on gold loans:
Loan Amount: The loan amount applied plays a crucial role in determining the interest rate. Since the lender determines the loan amount depending on the gold’s value, the higher the gold rate, the bigger the gold loan per gram is available. At the same time, the higher the loan amount, the higher will be the interest rate. ankara travestisi
Monthly Income: Since a gold loan is a secured loan, it is much easier to avail than an unsecured one due to its simpler eligibility conditions. Most borrowers won’t face difficulty getting a gold loan from lenders. However, lenders would check the borrower’s monthly income to ensure repayment and decide their gold loan interest rate. Monthly income is a determining factor to define an individual’s repayment capacity. Higher monthly income with a low debt-to-income ratio will attract a higher loan amount at better interest rates.
Credit Score: The borrower’s credit score is another crucial factor affecting the loan interest rates. A high credit rating indicates timely repayment behaviour that assures high creditworthiness. In the case of an unsecured loan, the credit score determines an applicant’s eligibility. However, lenders use the credit score to determine interest rates in a secured loan like a gold loan. Therefore, individuals with a high credit score have more chances of getting a lower interest rate.
Lender’s Benchmarking Methods: A lender uses any of the two types of benchmarking methods to calculate the interest rate: MCLR or RLLR. MCLR stands for Marginal Cost of Funds based Lending Rate, and RLLR stands for Repo-rate Linked Lending Rate.
Different lenders may offer different interest rates depending on the benchmarking method they follow. If the lender follows the RLLR method, they will update their interest rate once in three months and affect the EMI amount accordingly. However, if the lender follows the MCLR method, the reset period will be 6 to 12 months. The gold loan interest rate changes whenever the Reserve Bank of India changes its repo rate. Therefore, before applying for a gold loan, checking the lender’s benchmarking method is crucial to determine the interest rate.
Calculate Interest Rate Using a Gold Loan Interest Calculator
The applicable interest rates directly impact the EMI amount to be paid in any loan type. The lower the interest rate, the lower will be the EMI amount. A gold loan interest calculator is an online tool that uses a mathematical formula to calculate the interest rate for gold loan. It is an easy-to-use tool that one may use 24/7 to make error-free, accurate calculations. The tool calculates interest rates based on the loan amount, repayment term, region, and gold value. ankara travestileri
People looking for immediate funds no longer need to use their savings. They can use the value locked in their gold assets without selling them with a gold loan. However, use the information mentioned above to get the lowest gold loan interest rate.
