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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