The demand for gold loans has increased significantly over the years, propelled by the attractive interest rates and ease of loan processing.
As the economy is unlocking after the pandemic, the economic activity in the country has increased. Business prospects are looking up and personal spending has also increased.
People are turning towards gold loans to get urgent cash for personal and business needs.
The gold holdings in India are estimated to be approximately 25,000 tonnes, which has fuelled the increase in the gold loan segment.
What differentiates one gold loan from another is the interest rate at which the gold loan is available. The interest rate applicable on the gold loan is the primary deciding factor for the gold loan’s cost.
5 Things To Remember About Gold Loan Interest Rates
Knowing a few crucial things about the interest rate can help customers be fully aware and alert while taking a gold loan. It can save them from setbacks, surprises, and unforeseen charges during the loan process.
The five things to know about gold loan interest rates are as follows:
The Method of Interest Calculation:
Gold loans come with an applicable interest rate, just like all other loans. Most customers assume that the interest on a gold loan is calculated on a simple interest basis. However, this is not the case. Most lenders charge an interest rate on the compound interest pattern on gold loans. The interest every month is calculated not on the original loan amount alone, but the original loan amount and the accrued interest.
Muthoot FinCorp offers customer-friendly gold loans. The interest rate on gold loans is calculated on a simple interest basis. It makes these more affordable for customers. Customers can use the online gold loan interest calculator to find the interest rate applicable under various gold loan schemes.
Increasing Interest Rates:
Many gold loan lenders increase the gold loan interest rates every month. Lenders give different reasons for this increment in the interest rates, like a default in payment from the customer’s end. Such increments increase the gold loan interest rate significantly. If the customer is unable to pay the heavy interest charges levied, his gold is sold off by the lender to cover the losses. Thus, the borrower must know the terms and conditions of the loan carefully before opting for it.
Lenders offer the option of paying back the loan in easy monthly instalments to the customers. Customers pay a part of the principal loan amount and interest rate every month as EMI.
Many lending companies such as NBFCs offer flexible repayment options to customers. The customers can use the gold loan interest calculator to calculate the applicable interest rate and monthly instalment amount they would have to pay for a loan amount. They can repay the loan in comfortable instalments or bullet payments. This flexibility reduces the chances of default on the gold loan.
Fixed Interest Rates:
Trusted lenders charge a fixed interest rate on gold loans. The interest rate for such loans remains the same throughout the loan’s tenure. Fixed interest rates decrease the overall cost of the gold loan for the customer and help the customer plan his repayment schedule and budget accordingly. Since there are no sudden increments in the interest rate, the chances of default in payments go down.
The Loan Amount Affects the Interest Rates:
The amount of loan availed by a customer decides the applicable interest rate on the loan. The interest rate is high for a higher loan amount. Therefore, it is advisable to find out the loan requirement and apply for the loan amount one needs. It will keep the interest rate in check and reduce the overall cost of the loan.
Muthoot FinCorp offers gold loans under different gold loan schemes for customers. These schemes offer different combinations of the loan amount, interest rate, and loan tenure. Customers can use the gold loan interest calculator and select the gold loan scheme that suits their needs best.
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