Gold loans are highly popular in India due to the country's strong affinity for gold. As one of the largest importers of gold, Indians view it not only as jewellery but also as a valuable investment. With gold loans, you can use your own gold as collateral to secure funds for various needs, including medical emergencies, business expansions, or other financial obligations.
This convenient financing option has gained immense popularity, as many financial institutions and lenders cater to your urgent cash requirements. So, if you are in need of quick funds, you can consider exploring the option of a gold loan in India.
However, to ensure a smooth experience, here are some common mistakes you should avoid when obtaining a loan against your gold.
Insufficient research and comparison
One of the primary mistakes you can make as a borrower is failing to conduct thorough research and comparison before selecting a lender for your gold loan. It is essential to understand that different lenders have varying interest rates, loan-to-value ratios, processing fees, and repayment terms. By not comparing these crucial aspects, you run the risk of choosing a lender with less favourable terms, which can ultimately lead to higher costs and potential challenges when repaying the loan. To avoid these pitfalls, take the time to compare lenders, and carefully consider the terms they offer to ensure you secure the best gold loan for your needs.
Not verifying the credibility of the lender
When applying for a gold loan, it is crucial to assess the credibility of the creditor. A gold loan is a secured loan where your gold acts as collateral, ensuring that the lender has the right to possess your assets until the loan is repaid in full. As a borrower, you must choose a trustworthy lender who will keep your assets secure. Avoid falling into scams by thoroughly researching and selecting a reputable bank or Non-Banking Financial Company (NBFC) known for providing reliable gold loans.
Not knowing the quality of gold required to secure a loan
Ensure that you are aware of the quality of gold that qualifies for a loan. When pledging your gold ornaments, make sure they meet the minimum purity criteria required by the lenders. Generally, lenders approve loans only on gold jewellery with purity of 18 karats. It is important to note that if your ornaments have precious gems embedded in the design, they will not be considered when determining the loan value. The loan amount will be solely based on the weight and purity of the gold. So, before applying for a gold loan, ensure that your gold meets the required purity standards to maximise the loan value.
Being unaware of the type of gold accepted for a gold loan
If you are unaware of the type of gold that qualifies for a gold loan, it is important to note that in India, lenders prefer gold jewellery as collateral. Most lenders do not offer gold loan on gold coins, bars, or bullion.
