In general, Indians tend to hoard gold, primarily in jewellery form. It is evident from the report revealed by the World Gold Council that says, in the first 9 months of 2021, India’s gold consumption reached 360 tonnes.
At the same time, the demand for gold loans is also on the rise, considering the increasing gold rates. It is the best time to pledge this yellow metal that otherwise sits idle and raises funds after choosing the best gold loan companies.
Before that, it is better to study the current gold rate trends and their effect on this loan to make an informed decision.
Current gold rates in India
The gold market in India is dynamic as the price of this precious yellow metal changes frequently. For instance, the 10 grams of 24-carat gold price is Rs. 48,250 on 10th November 2021. Whereas, a day before, on 9th November 2021, it was 47,990.
Similarly, 10 grams of 22-carat gold price on 10th November 2021 is Rs. 47,250, which was Rs. 46,990 a day before.
Resultantly, the gold loan companies decide the per gram value based on the latest prices of this yellow metal.
How do gold rates influence gold loans in India?
The Indian households possess gold of about $1.5 trillion in current price. It allows individuals to leverage the equity of this liquid asset through gold loans.
Current gold rates and gold loans are related in the following ways:
- Current gold rates and the loan amount shares a directly proportionate relation. Hence, when this rate is high, one can secure a higher loan quantum and vice versa.
- Similarly, gold loan companies offer lower interest rates while this rate is higher. It is because the high value of pledged gold reduces the lending risk significantly.
Note that gold also acts as a hedging tool against inflation. Besides these macro-economic factors, the gold loan LTV and interest rate also depend on various micro-economic parameters. Thus, individuals willing to avail the best gold loan available in the market should consider them while applying.
Tips to get the best gold loan scheme in India
Individuals prefer a gold loan for short-term financial requirements due to its various borrower-friendly features, including zero end-use restrictions. They can maximise the benefits by following the tips below:
- Pledge pure gold articles
Regardless of the quantity, borrowers can get a competitive gold loan interest rate by pledging purer gold. Although lenders accept a minimum of 18 carats of gold articles, one can get the best rates by pledging 24-carat gold articles.
Individuals can also use a gold loan calculator and enter the details of articles to check the maximum loan amount one can avail.
- Compare different lenders
While several gold loan companies are operating in the Indian lending market, it is necessary to compare different lenders to secure the best option. Leading financial institutions offer gold loans at simple eligibility criteria. For instance, individuals with poor and no credit history can also avail this credit. However, it is wiser to maintain a high monthly income to ascertain timely repayment.
Leading NBFCs like Bajaj Finserv offer online gold loans and other unique facilities such as part-release options and doorstep services.
- Decide the loan amount carefully
The loan amount also decides the interest rate applicable on gold loans. Although RBI has capped the loan against gold LTV at 75%, a substantial loan corpus will attract a higher interest rate. Hence, it is necessary to decide the loan amount carefully before applying to avoid over or under-borrowing.
Suppose an individual deposits gold articles of Rs. 10 lakh that borrowers will get up to Rs. 7,50,000, considering the pledged gold jewellery is 24 carat and does not have any impurities.
If an individual applies for a lower loan amount than that, they are likely to qualify for better interest rates, considering the reduced lending risk. The gold loan LTV also depends on the pledged items’ purity.
- Consider the interest rates and additional charges
Since the gold loan interest rate decides the borrowing cost, it is necessary to consider this factor while applying for it. Besides interest rates, lenders also impose additional charges as and when applicable.
For instance, individuals need to pay certain charges during part-prepayment or loan foreclosure, besides processing fees. However, selected financial institutions do not levy additional charges on these facilities.
Likewise, borrowers can also negotiate for processing fees by opting for a lender with which they have a prior relationship. Lenders also often waive off the processing fees as festive or seasonal offers.
Now that individuals know how gold rates influence the gold loan interest rate, they should also know the turnaround time of different gold loan companies. It will help intended borrowers secure funds almost instantly during financial emergencies.