Gold has long been cherished as a symbol of wealth and prosperity. Beyond its cultural and aesthetic significance, it is also a valuable asset that can serve as collateral for a gold loan. However, when it comes to buying gold, many individuals make critical mistakes that could later affect their gold loan application and the overall financial implications. In this article, we will explore some common mistakes to avoid when buying gold to ensure a smoother gold loan process and maximise the benefits of your gold jewellery.
Ignoring purity standards
The purity of gold is a crucial factor that determines its value. Gold is typically available in various purities, with 24-karat being the purest. But 24-karat gold is not suitable for crafting jewellery. When it comes to financing with gold, 18-22 karat gold is widely accepted.
Overlooking hallmarking
Hallmarking is a certification process that verifies the purity and authenticity of gold. It is a guarantee of the gold's quality and purity. Overlooking hallmarking can lead to disputes and uncertainties when pledging your gold for a gold loan. Always buy gold jewellery that is hallmarked by a recognised certifying agency to ensure its authenticity and purity.
Gold weight
In India, gold jewellery is priced based on its weight. Gemstones can increase this weight. Hence, when buying gold jewellery, you must estimate the weight separately. Since most jewellers weigh the entire piece, you may end up paying more than the actual gold weight.
Overlooking making charges
When purchasing gold jewellery, making charges are often included in the price. These charges cover the cost of designing and crafting the jewellery. Overlooking or underestimating these charges can affect the overall value of your gold when you decide to pledge it for a gold loan. Ensure that you are aware of and comfortable with the making charges associated with your purchase.
Ignoring the loan-to-value ratio
The loan amount that you can avail of is based on the value of the gold you pledge, known as the loan-to-value ratio (LTV). Ignoring the LTV can lead to overestimating the loan amount you can secure. To maximise your gold loan, understand the LTV criteria and choose gold assets that meet those requirements.
Ignoring market trends
Gold prices can fluctuate over time due to various economic and geopolitical factors. Ignoring market trends can lead to unfavourable loan outcomes. Keep an eye on gold prices and consider the timing of your gold loan application to maximise the value of your gold collateral.
Purchasing gold is not just about acquiring a valuable asset; it can also impact your financial decisions, including your ability to secure a gold loan. Avoiding these common mistakes when buying gold will help ensure a smoother gold loan process and enable you to make the most of your gold assets. Remember to research, understand the market, and choose your gold wisely to optimise your financial position.
