Gold loans have been one of the most popular means to take up funds owing to the ease in its process, less documentation requirement, quick availability of funding, and availability of a variety of loan repayment options. Also, note that gold loans come with the lowest rate of interest owing to its secured nature. For instance, for Muthoot finance gold loan, the Muthoot finance gold loan interest starts from 9 per cent per annum while for Muthoot personal loan interest is over 12 per cent per annum.
Between gold loan and personal loan, the option of personal loan usually takes days or even a few weeks for the disbursement while gold loan may be approved in just a few hours as you keep an adequate quantity of gold in the form of security against the loan proceeds. Additionally, the interest rate of gold loans is lower as compared to personal loans. So, owning gold physically can serve as an excellent investment or back up during unexpected financial occasions. Financial institutions like banks and NBFCs provide distinct gold loan repayment options. From bullet repayments to regular EMIs, you as a borrower can repay the gold loan based on your financial situation and suitability. Given here is a detailed info linked with the distinct gold loan repayment aspects including process, period and the best ways of making repayment.
How does a gold loan repayment function?
You as a borrower can pledge your gold as security and borrow the principal constituent depending on the gold’s weight, purity and present market rate. The interest rate and repayment tenure differ from one lender to another. You as a borrower can go for a repayment option that best matches your circumstances. The distinct ways to make the gold loan repayment include paying principal constituent and interest constituent equally in instalments, paying interest amount in the form of EMIs and making payment of the principal towards the end of repayment tenure, making repayments partially based on the fund available across repayment tenure or opting for bullet repayment option. You as a borrower must ensure to follow the processes that are involved in the repayment method you select. Once you have selected the preferred repayment method, then you can pledge the gold.
Also Check: Muthoot Finance Gold Loan Interest Rate
What’s the gold loan repayment process?
Distinct processes via which you can conduct gold loan repayment are EMIs, partial repayments and foreclosures and bullet repayments. Using the EMI choice, you can make repayment of your gold loan by making payment of your EMIs to the lender for a predefined time-period. Also, you can check your loan EMI through the online gold loan calculator. Under the bullet repayment choice, you can provide the interest and principal constituent at once by the end of repayment tenure. Also, you can make the partial repayments according to your fund availability and pay the whole interest and principal constituent before the tenure ends. In such a scenario, you can also foreclose the gold loan and take your pledged gold before the repayment tenure ends.
Know your gold loan period –
Gold loan period is generally short term. The maximum repayment tenure can be up to twelve months and in few cases like in the scenario of EMI option, it can be 36 months. Choosing the repayment tenure is crucial as the interest constituent enhances with higher repayment tenure.
What are the prudent ways to make gold loan repayment?
Mentioned here are some of the important prudent ways to make gold loan repayment –
Pay the interest constituent as principal and EMI towards the end –
Here, in this option, you can simply pay the interest constituent via the EMI option offered by the lender. The principal constituent can be paid in one time towards the end of repayment tenure. Usually, borrowers prefer to opt for this as they do not require worrying regarding the principal payment across the repayment tenure.
Pay the interest and principal constituent as regular loan EMI during the loan tenure –
This route best works for those with a fixed monthly earning. The EMI involves the interest and principal constituent. This option best works like most car loans or home loans wherein you as a borrower must pay partly the overall principal and interest constituent per month in the form of EMI across repayment tenure.
Bullet repayment –
Here in this repayment option, you as a borrower require paying the whole interest and principal proceeds at the end of the repayment tenure. You as a borrower do not require worrying regarding the EMI schedule or making any partial payment across the repayment tenure. While the gold loan rate is computed for every month for the whole repayment tenure, the overall interest and principal constituent are payable towards the end of repayment tenure in a single go. So, this process is known as the bullet repayment option.
Partial payments and foreclosure –
Making the partial payment and making payments of the whole principal and interest constituent before the repayment tenure is a favorable choice for you as a borrower in 2 major ways. You can repay the gold loan according to your fund availability. Having zero fixed EMI schedule endows you as a borrower with some flexibility. Additionally, if the whole loan is repaid before the tenure ends, you as a borrower can save substantially as the interest constituent for the rest of the tenure would be waived. Paying the whole interest and principal proceeds before the tenure ends and closing of the loan is called foreclosure. This choice is suitable for you if you are one of those looking to save your interest amount and want to claim your gold that you pledged as early as possible.
A gold loan option will always stay one of the highly preferred means of borrowing owing to its swift loan approval, multiple repayment choices, minimal documentation and other important gold loan benefits. You as a borrower must compare the rate of interest and repayment tenure options before zeroing in on a kind of loan. Also, you must study the distinct repayment methods as well as your financial situation to understand the best way of making loan repayment.