Easy ways to repay the Loan against Jewellery
Gold is one of the most critical assets that can be utilized both as a form of investment and jewelry. In times of dire need, emergencies like an unexpected medical emergency, or any other form of financial contingencies, taking a credit against the jewellery you own is one of the best financing options. It is also popular in the name of ‘Loan against Gold.’
The amount eligibility in the gold mortgage is decided based on loan to value ratio of the gold. It is calculated on determining the present value of the jewellery.
Eligibility criteria to apply for a gold loan
- The minimum age to apply for a credit is 18 years, and the maximum is 60 years.
- Both salaried and self-employed can apply for a gold loan.
Know about the repayment options
The jewellery credit gives the borrower the freedom to choose the repayment methods as per convenience. One can apply for a jewellery credit from banks and financial institutions both online and offline as per convenience. When you take a jewellery credit, you also need to repay the same. The best part about a jewellery credit is that there are different repayment options in the jewellery credit. It is like an added benefit; a borrower can avail themselves when applying for a jewellery credit. Here are the ways to repay the gold loan:
Partial Payment
Unlike other forms of financing options, the jewellery credit repayment schedule is quite flexible. Here one can go with the option of partial repayment also. Under this, one can make the partial payment of interest and principal amount. It helps in significantly reducing the total interest pay-outs by paying the principal portion at the initial level. The jewellery lender adopted a customer-centric approach in deciding the jewellery credit repayment strategies.
Regular EMIs
The option of paying regular EMIs is an innovative and convenient way of making jewellery credit repayments, especially for the salaried employed. This option works well for those who are receiving a fixed amount in their account. They plan their finances accordingly. Such section prefers to give monthly EMIs that consist of both the interest and principal amount.
When one chooses to pay interest first
Most of the people who apply for a jewellery credit opt for this kind of facility. They prefer to pay off all the interest amounts initially by way of paying monthly installments. All the principal amounts are paid back at the time the credit gets matured. The best part about this repayment option is that it reduces the borrower’s financial burden and saves them from paying hefty EMIs.
Bullet repayment
It is also one of the preferable repayment options available for jewellery credit borrowers. In this method, here you can pay all the interest and principal amounts altogether when the mortgage gets matured. The interest applicable to the credit amount is calculated each month and is being added to the principal amount. This option is a way a borrower can avoid paying any of the EMIs every month. But in the end, the jewellery credit amount to be paid becomes huge. One should choose this option only if they are sure that it will not be a hassle to pay the huge amount in one go.
You can apply for a jewellery credit for a short tenure and a jewellery credit for a long tenure.
Factors that decide the Gold loan interest rates
The interest rates applicable to the gold are their main USP. The major reason when a person is looking for instant cash applies for a gold loan. It is available at an affordable interest rate. It starts from 9% and goes up to 20% based on the gold loan eligibility criteria.
The banks and financial institutions are using two main methods to decide the interest rate for gold loans.
- MCLR linked lending rate
- Repo Rate linked lending rate.
One needs to understand that the interest rate for gold loans tends to keep on changing. It also varies from lender to lender. The reason is the benchmark they are choosing to calculate. For instance, if India’s Reserve Bank has decided to cut 40 basis points in the Repo rate, it will also come in the Repo rate linked lending rate.
The jewellery credit interest rates are updated by the RBI once in three months. The change is reflected in your EMIs compared to the rates applicable to MCLR for the period ranging from 6 months to 1 year.
Know about maximum gold loan tenure
The gold loan tenure is relatively less as compared to other loans. The maximum gold loan tenure given by the lenders of banks or financial institutions is 24 months. If the jewellery credit is for short tenure is for 6 months, and the gold loan for a long tenure is usually 12 months or above.
Know about EMI payments of the Gold loan with longer tenure
If you opt to go with monthly installments, you can repay the jewellery credit by making a maximum of 24 payments. It means you are given 24 months. If you opt for a short tenure to repay the mortgage, it can be done in a maximum of 12 months. The best part about the jewellery credit is that there are no prepayment charges if one forecloses the mortgage in the mid only. A minimum of 3 installments is required to be paid before closing the mortgage.
Applying for short term loans and paying a lump sum for the same
If you choose a gold loan for a short tenure, you become eligible for getting a maximum of 6 months to pay the loan that too at a fixed interest rate. This option allows the borrower to repay the whole credit amount either in 6 months or before 06 months.
Facts to keep in mind while repaying the gold loan
- When you are making repayment of the gold loan, you should know how installments are being paid. Some of the lenders allow making EMI payments in cash. Also, some offer online payment options.
- Secondly, whenever you are approaching a lender for closing the jewellery loan account, you need to make a deposit first as the principal part of your jewellery loan. Once you have paid the jewellery credit dues, put your gold loan account status as ‘Closed.’
- Once you get the confirmation of your jewellery credit account closure, the concerned authority will return your pledged gold and request you to acknowledge the account closure as per the procedure. The Gold jewelry pledged against the credit taken could be reused again, be it for your personal use or to get instant cash at times of financial emergency in the future.
Bottom line
The jewellery credit can be an idle solution for all those facing extreme difficulties in getting loans from other forms due to having a poor credit score or bad repayment history. Gold loan is given based on the borrower’s security like gold ornaments, bars, or coins. It comes with the best interest rates, easy eligibility criteria, quick loan disbursal, and easy options to repay the mortgage. The best part is that it has zero foreclosure charges.
But your CIBIL™ may get affected in case you missed out on any of the EMIs. The best way to avoid facing missing EMIs is to choose the right tenure and repayment method. Plan your finances well.
