Customers face various types of needs in their point of lives and for such needs, several lenders provide different kinds of loans. Gold Loan is one of the popular loan options among customers. The reason: Indian people have a habit of having gold for both as an investment and saving asset. And this gold can help them in their emergency times. How? Lenders provide required loan amounts to the customers against their gold ornaments and coins minted by banks.
The best thing about a loan is the affordable Gold Loan Interest Rate that makes it easy for all the customers who want to have a pocket-friendly EMI. In case of any loan, it is important to check the interest rates provided by the lender so that you can see if loan repayment can be done on time. In this article, we will cover everything related to gold loan interest rate so that you can learn the importance of it. Other than this, we will also cover the different repayment methods of gold loan as this is one of the best features of Gold Loan. If you want to know more, keep reading.
How is the Gold Loan Interest Rate Determined in India?
The prices of gold are at all-time high and it can help you in getting a higher loan amount. Well, how? Lenders decide the gold loan amount according to the overall price of your gold and usually provide upto 65% to 90% of the overall price of gold. Since prices are higher, you can get a higher loan amount. But customers often have this question in their mind about how lenders determine the gold loan interest rate for customers?
Well, there are a few important factors that can determine your gold loan interest rate. Some of them are Loan Amount, Credit Score, External Benchmarking, Monthly Income, etc. We are showing details about each of them below. Please have a look.
Loan Amount:- Loan Amount is one of the crucial factors that can determine your final rate of interest. If we were to put it simply, higher the loan amount, higher will be the interest rates. It is common among lenders that they decide the gold loan interest rate according to the pledged gold by customers. For example, if you are going for a Indian Overseas Bank Gold Loan, the interest rate will be higher for a loan amount above INR 3 lakh as compared to below this loan amount.
Monthly Income:- Lenders also make sure of the fact that you will be able to repay the loan on time and they check this by your monthly income. Before providing the loan amount, lenders check the monthly income of the individual to estimate the repayment capacity. If an individual has higher monthly income, he or she can get lower interest rates. It is clear that a person with low income would not get a higher loan amount due to limited repayment capacity.
Benchmarking Methods:- There are mainly two types of Benchmarking methods that can decide the Gold Loan Interest Rate for you. These are MCLR-lined Lending Rate and Repo Linked Lending Rate. And according to these, the interest rates tend to change from one lender to another. If the gold loan interest rate is linked to MCLR, the rates will be updated once in 6 months or 1 year. While in the case of RLLR-linked, the reset period is fixed at minimum once in 3 months. So, while choosing the Gold Loan interest rates, it is important to see which methods your lender is following.
Credit Score:- People with good credit scores (700 or above) can get lower rates as compared to borrowers with poor credit scores. Reason: a high credit score indicates the responsible repayment behavior of an individual and it simply means that an individual can handle his or her debt perfectly. Credit Score doesn’t affect your eligibility in case of a gold loan, but gold loan interest rate.