Understanding gold’s significance in Indian households
Most Indian households buy gold jewellery items such as necklaces, bangles, and earrings during weddings and festivals. Gold holds significance in our culture and serves as a valuable asset. During emergencies, you can exchange your gold jewellery for money, usually at a higher rate than its original value.
Unlike unsecured loans such as personal loans or home loans, loan against gold jewellery involves minimal documentation, quick disbursals, and low gold loan interest rates. With Bajaj Finance, you can enjoy a hassle-free process, fast access to funds, high gold loan per gram, and affordable borrowing options for your needs.
If you have taken a gold loan and want to repay it conveniently, there are several simple strategies you can adopt. By following these five easy ways, you can effectively manage your gold loan repayment and alleviate financial stress. Let us explore these methods to ensure a smooth repayment process.
How does gold loan repayment work?
When you take a gold loan, your gold jewellery is kept by the lender as security until you pay back the loan amount along with interest. The lender allows you to borrow a certain percentage of your gold’s value, known as the loan-to-value (LTV) ratio as loan. For example, with Bajaj Finance, if your gold is worth Rs. 50,000 and the LTV is 75%, you can get a loan of Rs. 37,500.
When it comes to repaying a Bajaj Finserv Gold Loan, you have flexible options to suit your financial needs. You can choose to pay only the interest periodically—whether monthly, bi-monthly, quarterly, half-yearly, or annually—while the principal amount is paid at the end of the loan tenure. Bajaj Finance also offers the benefit of part-prepayments at any time during the tenure without any additional charges. This option allows you to reduce your outstanding principal and save on interest costs. If you wish to clear your loan early, you can choose foreclosure by repaying the entire loan amount before the end of the tenure, again with no foreclosure charges. To make repayments convenient, Bajaj Finance provides multiple online payment methods, including debit cards, credit cards, net banking, UPI, and e-wallets. Choosing the right repayment plan and paying on time is crucial to avoid penalties or the risk of your pledged gold being auctioned.
Understanding gold loan repayment options
These are some gold loan repayment options that are available for borrowers:
Equated monthly instalments (EMIs)
One of the easiest ways to repay your gold loan is by opting for equated monthly instalments (EMIs). With EMIs, you can break down the loan amount into smaller, equal payments. The EMI consists of both principal and interest components, allowing you to repay the loan gradually over the agreed-upon duration. Ensure timely payments of your monthly EMIs to avoid any penalties. You can automate these payments through electronic payment methods or set reminders to stay on track.
Bullet payments
Bullet payments refer to making lump sum payments towards your gold loan at specific intervals, typically once a year or whenever you have surplus funds. By making these additional payments, you can reduce the outstanding balance and minimise the interest accrued. Bullet payments can help shorten the loan tenure and save on interest charged as per the calculated gold loan interest rate. Though, Bajaj Finance does not offer this repayment facility for gold loan.
Monthly payment of interest
Another option is to make monthly payments of only the interest accrued on your gold loan. This approach allows you to manage your cash flow more effectively by paying only the interest amount on a regular basis. However, it is important to note that this method does not reduce the principal amount of the loan. Ensure that you are aware of the terms and conditions regarding interest-only payments and understand how it impacts your overall loan repayment.
Part-prepayments
Part-prepayments involve making additional payments towards the principal amount of your gold loan, apart from your regular EMIs. Whenever you have surplus funds, consider allocating them towards part-prepayments. By reducing the principal amount, you can decrease the interest burden and shorten the loan tenure. Part-prepayments offer flexibility in loan repayment and can help you become debt-free faster.
Foreclosure
If you have the financial means to do so, foreclosure is an option to consider. Foreclosure involves repaying the entire outstanding balance of your gold loan before the agreed-upon tenure. By opting for foreclosure, you can save on interest charges and become debt-free quickly.
Repaying your gold loan does not have to be overwhelming. By implementing any of these five easy ways - opting for equated monthly instalments (EMIs), making bullet payments, choosing monthly interest payments, considering part-prepayments, or exploring foreclosure - you can efficiently manage and repay your gold loan, bringing you closer to financial freedom.
In case you are looking to apply for a gold loan, you can do so by visiting the Bajaj Finance website.
How to select the best repayment option
Selecting the best repayment option for your gold loan depends on several factors. You should first think about the loan tenure. A longer tenure gives you more flexibility, allowing you to choose options part prepayments. Next, consider your income stability. If you have a steady monthly income, regular monthly interest repayments might be a good choice. For those with irregular income, other repayment plans may suit better. Funds availability is another key factor. If you can arrange a large sum early, you might want to prepay the interest or make part payments during the loan. To learn how to repay gold loan faster, paying extra towards the principal or clearing interest early can help save on total interest. Lastly, consider your financial discipline, since options without instalments require careful saving to avoid missing repayment deadlines.
Benefits of repaying your gold loan early
Repaying your gold loan early can offer several advantages that benefit your financial health. First, it helps reduce the total interest outgo, saving you money in the long run. Early repayment also improves your credit score by showcasing responsible financial behaviour, making it easier to access future loans. It frees up your pledged gold assets sooner, allowing you to use them for other needs. Additionally, clearing your loan early reduces financial stress, giving you peace of mind. Some lenders may even offer lower interest rates or waivers on penalties for early repayments, adding to your savings.
How overdraft gold loans can help with faster repayment
Overdraft gold loans provide a flexible repayment option, making it easier to clear your loan faster. Instead of a fixed EMI structure, you pay interest only on the utilised loan amount, reducing your financial burden. This flexibility allows you to repay the principal as per your convenience, accelerating the repayment process when you have surplus funds. Overdraft gold loans are ideal for individuals with fluctuating incomes, such as business owners or freelancers, as they allow better cash flow management. By enabling quicker repayments, they help minimise the total interest paid over time, making them a cost-effective solution. Additionally, faster repayments through this facility can improve your credit score and financial credibility.
