As gold loan has simple to-meet eligibility parameter, it would not be incorrect to say that anyone can secure funds by pledging jewellery as security or collateral. Lenders like Oro gold loan, Indiagold gold loan, Axis bank, HDFC, and ICICI Bank levy lower rates of interest on this credit option than unsecured credit options. On repayment, the creditor returns assets.
Precisely owing to the security-backed nature, the gold loan has lower borrowing costs, which makes it a suitable option for most of you as a borrower. This said, repaying the gold loan can, at times, become burdensome due to other financial responsibilities. So, let’s go through some of the crucial ways of managing gold loan repayment well.
What are the prudent ways to lower the gold loan repayment burden?
Here are the six best ways of managing gold loan repayment –
∙ Go for the bullet repayment option
∙ Borrow the exact procedure you require
∙ Go for the shorter repayment tenure
∙ Prioritize your monthly repayments
∙ Make part payments or prepayments
∙ Refinance with a lower rate of interest
Check out these points in detail –
Go for the bullet option
In the case you opt for the bullet repayment option, you can pay the principal proceeds along with the interest constituent by the end of the repayment tenure. You do not require following any EMI schedule. As you are a borrower, repay the loan in a go, this kind of repayment option is called a bullet repayment plan.
Also Read: Indiagold Gold Loan
Borrow only the amount you need
It is crucial to make sure you apply for only the loan proceeds you require. Nothing more and nothing less. Over-borrowing may become extremely cumbersome. You will require paying the interest on excess loan proceeds. You, as a new applicant, must ensure to estimate the required amount to avoid making payment of higher interest constituent charges. Ensure that the lower the loan proceeds, the lower the levied rate of interest. Even in case you are eligible for a higher loan, proceed and ensure to stick to the requirements.
You, as an applicant, can use the gold loan calculator available on the online platform to decide the maximum loan proceeds you are eligible for by pledging the gold jewellery.
Go for the shorter repayment tenure.
Unlike the interest rate, loan repayment tenure is inversely proportional to the loan EMI. In simpler words, if you, as a borrower, can opt for a higher repayment tenure, you will require paying a lower EMI, wherein a shorter repayment tenure enhances the monthly instalment.
Prioritize your monthly repayments
Once your estimated loan proceeds requirement is final, you must look for the lender providing the gold loan at an affordable rate of interest. As the applicable interest rate directly affects the monthly payable amount, it is of great importance to conduct your market research before you zero on a lender. The higher the interest rate levied, the higher will be the loan EMI.
Make part payments or prepayments.
One of the crucial ways to make substantial savings on loan against gold is through prepayment. Reputed lenders generally charge zero fees on gold loan part prepayment. Thus, if you are an existing gold loan customer, then you can make small prepayments, as and when possible, through your additional funds. This will reduce your overall interest cost on a gold loan.
You can even consider foreclosing your gold loan to save the interest outgo amount. However, in a scenario of foreclosure, you must ensure that the lenders can impose a foreclosure charge. Thus, it is wise to check for the lender offering nil or negligible charge on foreclosure or part prepayment.
Refinance with a lower rate of interest
It is even a feasible route to manage your gold loan repayments. Existing customers repaying their gold loans at high-interest rates can consider refinancing from a bank lender providing a comparatively lower rate of interest. This can help them make considerable savings on the prevailing loan.
While the rate of interest plays an important role in regard to EMI payable, it must not be the only parameter considered while placing an application for the balance transfer route. You must ensure that the loan refinancing is only a fresh application for a loan with a new lender. So, the whole loan sanctioning procedure starts again, which is less stringent as compared to your initial application for the gold loan. Ensure to consider the processing fees and other associated charges too.
Read on to know the benefits of opting for a gold loan –
Flexible repayment mode
Opting for the lender offers a flexible repayment structure, which makes gold loan repayment extremely affordable for you as per your financial potential. You may repay the borrowed amount at any time during the loan repayment tenure with EMIs or through any other repayment mode as per your choice.
Compact loan tenure
A gold loan is one of the preferred routes for you as a potential borrower looking for maximum loan proceeds for a short-term period. This loan allows you to opt for the gold loan with the highest repayment period of up to 4 years. One of the benefits of such short-term credit options is that it lowers the interest outgo, allowing you to make the maximum savings on loan.
Zero prepayment or foreclosure fees
Reputed lenders permit you to make prepayments or part prepayments of the outstanding loan at zero additional fees if you avail of the loan at the floating interest rate. However, in the case of a fixed rate gold loan, then you may be charged part prepayment or foreclosure fee.
Competitive rate of interest
When it is about loans, not mentioning interest benefits is nearly impossible. As the monthly payable depends on the levied rate of interest, opting for the lender providing the lowest interest rate is a must. As a gold loan is a secured credit option, it has the lowest interest rate than an unsecured credit option. However, you can get the best gold loan offer only if you compare different lenders. Thus, ensure to compare different lenders to zero on the lender offering not just the lowest gold loan interest rate but even providing you the best terms and conditions.