One of the most efficient and fastest ways to fulfill your financial needs among customers is considered to be a gold loan. There are so many reasons. First, this loan type is a totally secured loan which means you don’t need to undergo any kind of eligibility criteria to get the loan amount. Second, you can get a higher loan amount according to your current gold rate. Third, interest rates are also quite low because of a gold loan’s secured nature. Also, we, Indians have this old habit of fulfilling our investing and saving purposes with the gold.
But you must be wondering what is the role of gold price in deciding your gold loan amount? Well, it is one of the crucial factors in getting you a higher loan amount. When you go for a gold loan, the lender checks the present value and quality of your gold ornaments or coins. According to the current gold price, lenders provide a loan amount that ranges from 65% to 90% of the overall prices of the gold up to the maximum limit decided by the lender. For example, if the overall price of your gold is INR 10 lakh, you can get a loan amount of INR 6.5 lakh to INR 9 lakh against your gold. However, the maximum limit changes from one lender to another, and you should keep this in your mind while choosing this. Now, in this article, we will be discussing the method by which lenders decide the gold loan interest rate. Keep reading to know more! Does Current Gold Rate Determine Your Gold Loan Interest Rate? Many people often ask the question of whether the current gold price determines their gold loan interest rates. Well, the answer to this question is no. Current Gold price only and only decides your gold loan amount. The higher the gold prices, the higher will be your loan amount. But there are a few factors that determine your gold loan interest rate. These factors are loan amount, credit score, external benchmarking method, monthly income, etc. You can know about them below. Gold Loan Amount - Loan amount directly affects your interest rate. The higher your gold loan amount, the higher will be the interest rates. There are several lenders that determine the interest rates according to the loan amount you are choosing, and as you know, the loan amount depends on the gold price. If you do not want a higher loan amount, you can opt for a lower rate. Monthly Income - Lenders also want to make sure that an individual will be able to repay the loan amount. To ensure this, they check the monthly income to gauge an individual’s repayment capacity. An individual with a higher income can get a lower gold loan interest rate because of the higher repayment capacity. Credit Score - Although credit score doesn’t play any role in determining your eligibility while opting for a gold loan, your interest rate can be affected by it. An individual with a good score of 700 or above can surely get a lower interest rate as compared to an individual with a low score. Benchmarking Methods - Lenders usually apply two types of benchmarking methods that can decide the gold loan interest rate for you - MCLR-linked lending rate and Repo rate linked lending rate. If you are choosing MCLR-linked rates, your interest rate will be updated once in 6 months or 1 year, while on choosing RLLR, your rate will change once in 3 months. So, when going for a gold loan, do keep this factor in mind apart from the current gold price.
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Do you know that your idle gold ornaments can be a suitable option if you want to fulfill your urgent financial need? Well, if you didn’t know it yet, know this now that with the help of a Gold Loan, customers can get the loan amount against their gold ornaments and coins minted by banks. But one of the most common questions that people ask is how do lenders decide the gold loan amount? Well, the answer to this question lies in the present gold price. A lender first assesses the overall value of your gold ornaments and then provides you the gold loan amount accordingly.
The loan amount usually ranges from 65% to 90% of the overall gold price of your ornaments. This criteria changes from one lender to another. So, suppose the overall value of your ornaments is INR 10 lakh, and you want to get a Gold Loan against this, you can get a maximum loan amount of INR 9 lakh that can be as low as INR 6,50,000. So, you can see the importance of gold price when going for a Gold Loan. When you want to opt for a Gold Loan, lenders evaluate your ornaments according to the Gold Rate today and then decide the final loan amount. In this article, we will talk about how gold price and a few other factors also affect the Gold Loan interest rates. So, keep reading to know more. Impact of Gold Price on Loan Amount & Gold Loan Interest Rates Gold Loan Interest Rate is one of the most important factors of the Gold Loan and that’s why individuals always look for lower rates. We are seeing some of the factors that determine Gold Loan Interest Rates. Have a look. As we told you the gold price determines the gold loan amount. If the gold rate today is at an all-time high, you could get a higher loan amount. But it’s also important to know for you that the higher the loan amount, the higher would be the Gold Loan Interest rates. Several lenders decide gold loan interest rates according to the present gold value. For example, the Indian Overseas Bank Gold Loan Interest Rates tend to change according to the loan amount. Apart from Gold price, there are a few other factors too that decide the Gold Loan interest rates such as Monthly Income, Gold Loan Benchmarking Methods, Credit Score, etc. For example, if an individual has a higher monthly income, he or she will have a better repayment capacity and that’s why lenders may provide lower interest rates. Gold Loan Interest rates also change from one lender to another according to the benchmarking methods - MCLR linked Lending Rate (Internal) and Repo Rate Linked Lending Rate (External). If the Gold Loan rates are linked to RLLR, it will be updated once in a minimum of three weeks, while for the MCLR-linked lending rate, the reset period is fixed at 6 months or 1 year. It doesn’t matter if your Gold Rate Today is high, it is not necessary that you will get a higher loan amount at lower rates. Lenders also check the credit score of an individual before deciding the final loan amount and interest rates. An individual who has a good credit score (750 or above) may have higher chances to get a higher loan amount at lower rates as compared to an individual who has a poor score. One thing you also need to remember is that lenders charge a spread/mark-up/margin on the RLLR and MCLR while deciding the gold loan interest rates. This spread/mark-up/margin can vary according to the credit score of borrowers. If you have a good credit score, lenders may decrease this because of past repayment behavior. This can reduce your interest rates further. So, you can see that apart from Gold Price, there are several factors that affect your Gold Loan Interest rates and you should keep them in mind while applying for a Gold Loan. |
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Anika Sharma
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