The unprecedented nationwide locked inspired by the COVID-19 pandemic has adversely impacted the economy and caused financial instability for many businesses and people. Many people lost their jobs, and to cope with uncertain events, they had to dip into their savings, sell their valuable jewelry or take loans to meet financial liabilities. 

Loans have always helped people deal with immediate financial requirements, such as paying for children’s education, marriage, or for a medical emergency. There are various finance options available depending on your needs. However, one type of loan that is popular among Indians is gold finance. Its popularity stems from the fact that it has a lower interest rate compared to a personal loan. 

Gold finance is a secured loan that requires the borrower to pledge his gold ornaments or coins as collateral. Anyone who has gold can avail of the gold loan to deal with financial distress at home or business. With gold prices on the rise, you are likely to get a good value for your gold. 

Gold can be in any form, jewelry, coins, or bars. Some people prefer getting gold finance from banks, while others go to non-banking financial companies. However, you must consider important things before applying for gold finance. 

– Interest rate

Interest rate is one of the most crucial factors to consider while applying for gold finance. Compared to a personal loan, the interest rate on gold loans is low. The interest rates offered by banks and non-banking financial companies are different. 

In some cases, NBFCs offer lesser interest rates depending on the quality of gold. Whether you are planning to approach banks, NBFCs, local gold vendors, you must ensure to get the best quote before handing your gold to the lender. Lenders usually use a gold loan interest rate calculator to determine the best rate. 

– Loan amount 

The gold rate is subject to market change. Lenders calculate the value of loans differently. Some lenders calculate the previous two weeks’ gold prices and then take an average to determine the rate per gram gold; while others take the daily market rate to evaluate your gold. Consider the plan that suits you best and gives you a higher gold value. 

– Lender credibility

Some lenders entice people with lower interest rate offers but be wary because they can be a fraud. Usually, there is less or no paperwork after you handover your gold. So, lenders feel confident and secured as your gold is in his custody, but what your confidence? 

You hardly have any guarantee from the lender regarding the safety of your gold. So,  before applying for gold finance, do a background check, ask for credentials and relevant documents to check the legitimacy, and choose a reputed gold lender, which ensures the safety and security of your gold. 

– Loan repayment 

A gold loan is a secured loan where the lender is at no risk because there is no chance of default in payments. The popularity of gold loans stems from the fact that you can get an instant loan with a lower interest rate. 

A word of advice, you must only apply for a gold loan if you are sure to pay back the loan amount within a chosen loan tenure. Once you completely pay the loan amount with interest, you can claim your gold from the lender, and if you fail to pay back the loan amount, you might lose your gold. 

– Hidden cost and fees

The cost and fee percentage entirely depend on the banks and non-banking financial companies you prefer to take a loan from. The lenders usually charge a nominal 1% of the loan amount as a processing fee. 

However, you can check with your preferred lender before opting for gold finance. 

– Gold loans are versatile.

You can pledge your gold jewelry, bars, and even coins.  Your gold is tested for purity first before sanctioning a loan amount. Gold bars and gold coins have a higher purity vis-a-vis gold ornaments, hence offer a higher value. Gold ornaments have embellishments and gems which are irrelevant, and a gold loan is sanctioned against only the weight of the gold. 

Conclusion, 

Muthoot Gold finance is the easiest and fastest way to get instant money because it requires minimum documentation. Also, it is advised to get your gold insured before giving them to the lender as it offers insurance in case of robbery or theft.