Gold loan repayment is one of the most important things to consider while taking a gold loan. There are various ways in which you can repay your gold loan. A gold loan is a secured loan where you can pledge your gold ornaments as collateral to avail of the loan.
The lenders give you the loan amount based on the purity and weight of your gold. The main advantage of a gold loan is that it offers a lower interest rate than other types of loans such as personal loans, business loans, etc.
Moreover, the repayment tenure of a gold loan is also flexible, and you can repay it within 1 to 5 years. There are different ways in which you can repay your gold loan, and some of the easiest ways are mentioned below:
1. Prepayment: You can make a prepayment of your loan amount by paying the required amount to your lender before the due date. This will help you in saving on interest payments.
2. Gold Swap: You can swap your gold jewellery with the lender in exchange for the loan amount. This way, you will not have to repay the loan amount and can get your gold back.
3. Gold Refinancing: You can refinance your gold loan by taking a new loan from another lender. This will help you get a lower interest rate and flexible gold loan repayment option.
4. Partial Payment: You can make a partial payment of your loan amount every month to reduce the interest payments.
5. Full Payment: You can repay the entire loan amount in one go to save on the interest payments. These are some of the easiest ways to repay your gold loan. You can choose any option that suits your needs and requirements.
Why are longer gold loan tenures better for borrowers?
Gold loan tenures have gradually increased over the past few years, which is good news for borrowers. The reason is simple – gold loans are one of India’s cheapest forms of borrowing. And the longer the tenure, the lower the gold loan rate. For example, let’s say you take a gold loan of Rs. 1 lakh for 12 months.
The gold loan rate is 10% per annum. In this case, the Interest you will pay on loan over 12 months works out to just Rs. 833 per month. Now, let’s say you take the same gold loan but for a tenure of 24 months. The gold loan rate remains the same at 10% per annum. However, since the tenure is doubled, the monthly interest outgo reduces to Rs. 417.
This is because Interest on gold loans is calculated daily and not monthly or yearly. Therefore, when you extend the tenure of your gold loan, you effectively reduce the gold loan rate. While a longer gold loan tenure may seem like a good idea, there are some things you should keep in mind before taking one.
Firstly, gold prices are volatile and can fluctuate sharply over short periods. This means that the value of your collateral (the gold pledged with the lender) can also go up or down. If gold prices fall, you may be required to pay more monthly instalments to keep your loan account in good standing.
Secondly, gold loans are best suited for short-term borrowing needs. If you take a gold loan and then extend the tenure multiple times, you will pay more in interest than if you had taken a personal loan with a longer tenure in the first place. This is because gold loan rates are generally higher than personal loan rates.
Therefore, it is important to think carefully before taking a gold loan with a long tenure.
A gold loan is a good option if you are looking for a cheap and flexible form of borrowing. The main advantage of gold loans is that they come at a lower interest rate than other types of loans, such as personal and business loans.
Moreover, the gold loan repayment tenure is also flexible, and you can repay the loan amount at your convenience. However, gold prices are volatile and can fluctuate sharply over short periods.
Therefore, it is important to think carefully before taking a gold loan with a long tenure. It would be best if you also kept in mind that gold loans are best suited for short-term borrowing and not long-term financing needs.
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