Various Gold Loan Repayment Methods That You Can Opt For
Looking for flexible gold loan repayment methods? Check out our guide on the various options available to make repayments hassle-free, from online payments to EMIs and more.
Indian households have been accumulating gold for ages as a form of security that may be utilised or liquidated during trying times.
Gold is frequently purchased or given as a gift at important and auspicious occasions such as festivals and weddings in the majority of Indian homes. However, physical gold does not accrue interest when it is held at home or in a bank locker.
Therefore, now with the emergence of loans against gold, this latent asset has become a popular source of raising funds through gold loans to tide over short-term needs for cash.
A gold loan is a secured loan that a borrower obtains from a bank or non-banking financial institution by pledging their gold to the lender as security. The gold jewellery is temporarily held by the lender, who gives it back after the repayment of the borrowed funds.
Gold loans are short term with a maximum tenure of five years. The average tenure of such loans is one year or less. Most lenders allow prepayment option without any charges or a minimum lock-in period.
Repaying a gold loan entails paying back the principal amount borrowed plus interest and any other fees the lender may charge. In essence, a gold loan account is closed when the borrower repays principal and interest on the loan.
Gold Loan Repayment Methods
The gold loans can be repaid efficiently in a number of ways. Borrowers can make the gold loan repayment on maturity or choose the option of foreclosure. Repayment methods include:Periodic EMI:
The majority of applicants for gold loans choose this option. In this approach, the interest and principle amounts are both included in the equivalent monthly installment or EMI. The EMI amount will be conveniently taken out of the borrower’s bank account each month, therefore it works well for applicants who have a regular income.Partial Payments:
Some lenders also give borrowers the choice to pay interest and principle in full or in part, regardless of the EMI schedule. If the principal amount is paid before the complete interest amount, this method of repayment saves the serviceable interest.Pay Interest via EMI And Principal Later:
In this form of repayment, just the interest is paid as an EMI, while the entire principal amount is paid at maturity. With this repayment plan, the borrower can make smaller payments on a regular basis and pay the principal in one large sum only when the loan matures.Get Gold Loan at the comfort of your home
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Bullet Repayment:
This is one of the most flexible options for repaying a gold loan. One need not have to pay anything during the tenure of the loan if they opt for this repayment method. Once the tenure is completed, one can pay both the principal and the interest sum in one go, therefore, this process is termed as "Bullet Repayment". However, it must be noted that the interest payment will be calculated each month and added to the principal sum.
At times, the borrower may be faced with some unforeseen situation rendering him unable to make the loan payment on time. Even though credit score is not taken into account when giving a gold loan, a missed payment can hurt one’s credit score.
Therefore, to avoid such a situation, a gold loan applicant must keep in mind certain factors.
One must apply only for the amount that is required because a lower loan amount will attract a interest outgo. They must also keep in mind their repayment capacity to ensure they have enough funds to repay the loan in the tenure they have opted for.
An existing debt may be refinanced if it seems expensive or risky. However, before taking up this option, the borrower must take into account any additional fees and foreclosure costs. Borrowers with limited income or resources may choose the bullet repayment scheme.
Conclusion
As with any form of credit one needs to carefully plan the repayment of the gold loan keeping in mind financial situation and repayment capability. On failing to repay the gold loan the lender may opt to auction the gold jewellery. This also impact one’s credit score and affect one’s ability to get any loans in the future.
Most reputed lenders such as IIFL Finance offer many ways to conveniently repay the gold loan as per one’s convenience. As gold loan is a secured asset, the lender may take a more lenient approach even if one is facing difficulties in servicing a loan.
With lenders like IIFL Finance, one can negotiate easier terms and conditions such as extending the tenure or lowering the EMI to avoid a default on the loan.
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Apply NowDisclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.
