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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Anika Sharma
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