Gold is obviously the most commonly used precious metal in the Indian subcontinent. Be it for marriage or even a religious festival, gold is a sacred part of the rituals. Gold, in the form of ornamentation and jewelry, is usually possessed by urban as well as rural households and often is used at times of financial crisis or any other economic emergencies. It is due to the popularity of this precious metal that banks and other financial institutions have started focusing on it, marketing it for the benefit of their customers. Gold loans have become immensely popular today. However, at the same time, it is essential to avoid a few major mistakes while applying for a gold loan. Let us discuss.
1. Lender credibility
It is a major mistake if you do not check the accreditation of the lender that you are availing your gold loan from. It is better to start your financial story in the right way as it will ultimately show up on your credit score. Therefore, it is recommended to choose well known financial institutions and other reputed banks.
2. Choice comparison
Majority of the lenders will be ready to give you a loan based on the net worth value of your gold. Be a smart customer and check around for other options and offers to choose the best gold loan to get your money worth. It is advisable to not go for the first option that is offered to you.
3. Repayment negligence
It is important to select the type of repayment structure which is best suited for your needs. The four of them are
• Regular EMIs
• Partial Payment
• Only Interest EMI
• Bullet Repayment
4. Ignoring the details of LTV calculations
LTV is the abbreviated version of Loan to Value usually of an asset or product purchased. If you are availing a gold loan, it is essential to understand how the loan is calculated and what the market value of the gold is, just to have a general idea about how the process works.
5. Not aware of the types of gold
It is important to know what sort of gold the bank or financial institutions accept so as to help you avail your gold loan. In order for a bank to grant you a gold loan, your gold must have a purity certificate stating that it is 22 karat or the next level.
Apart from these tips, the bottom line therefore is that every financial contract or agreement needs to be properly scrutinized and understood before providing an official signage. Make sure you consider all available alternates before selecting the best gold loan suited for your specific need.