As you know when you ask for a loan amount from any lender (Bank or NBFC), the most important thing that a lender makes sure of is the Credit Risk. In simple terms, the risk of not getting the loan amount from a borrower. In the case of a personal loan, lenders make sure of this by checking the credit score of an individual. But people who don’t have a good score or don’t have a credit score often choose Secured Loans such as Gold Loan, Loan Against FD, etc. When we talk about Gold Loan, one of the crucial things is the Gold Rate India that eventually determines your loan amount.
Don’t feel surprised now! It is true that you can get a loan amount by putting your gold coins and ornaments as collateral. Against this security, lenders provide the loan amount. But do you know that your final loan amount depends on the overall gold price? No? No problem, you do now know this. In this article, we will be telling you how the value of your gold will decide your final loan amount from different lenders. So, keep reading!
Why should you check the Gold Price before going for a Gold Loan?
As we said earlier, the Gold Loan Amount depends on the Gold Rate India, so you should always check the current price of gold before choosing the final lender. If the Gold prices are at an all-time high, you could get a higher loan amount. The higher the gold prices will be, the higher will be the loan amount. Usually, lenders provide a Gold Loan Amount that ranges from 65% to 90% of the overall gold value.
Let’s say the overall price of your gold is INR 10 lakh. According to this, your gold loan amount will range from INR 6,50,000 to INR 9 lakh. However, different lenders have different criteria when it comes to the final loan amount. Your past repayment behavior and Monthly Income are two important factors that determine your final loan amount. You should remember this important thing: Gold Loan amounts also affect your interest rates. For example, Indian Overseas Bank Gold Loan Interest Rates are different for the loan amount above and below INR 3 lakh.
Now, that you have understood how Gold Price affects your loan amount, you should also know how Gold Loan Interest Rates affect your repayment amount.
For this, we are giving you an example. Let’s say an applicant wants to opt for a 2-year Gold Loan of INR 3 lakh. To understand the impact, we are taking two different interest rates of 10.50% per annum and 15.50% per annum.
On considering the interest rate of 10.50% per annum, the EMI amount would be INR 13,913, while the interest outgo will be INR 33,907.
On the other hand, with the interest rate of 15.50% per annum, the monthly installment would be INR 14,617 and the interest amount would be INR 50,817.
So, you can see when the individual is choosing a higher interest rate, he is paying around INR 700 more in the EMI amount. So, if you choose a lower interest rate, you can save this amount. That’s why it is always advised to start your Gold Loan process by checking the current Gold Price.