The retirement years are meant to be enjoyed to the fullest after a lifetime of hard work. However, with longer life expectancies and rising costs, many senior citizens find themselves strapped for cash in their later years. This is where a gold loan can come in handy. By leveraging the value of your gold jewellery and ornaments, you can access funds to cover medical bills, home repairs, vacations and more. Read on as we share tips to help pensioners maximise gold loan benefits.
Choose the Right Lender
The first step to maximise gold loan value is finding the right financial institution that offers gold loans specially tailored to seniors. Look for financial institutions that provide:
- Low gold loan interest rates and processing fees
- Flexible repayment options
- Minimal paperwork and quick loan disbursal
- Option to renew or top-up the gold loan loan as needed
Leading banks and Non-banking Financial Companies (NBFCs) now offer gold loans for pensioners at attractive terms. Comparing interest rates and features across lenders will help you enjoy the most prominent senior citizen gold loan benefits.
Evaluate Your Gold
In order to maximise gold loan benefits, evaluate the gold jewellery you wish to pledge. Financial institutions offer loans up to 75% of the market value of gold. Hallmarked jewellery typically fetches a higher loan amount compared to non-hallmarked gold. Opt for a free gold valuation at the lender's branch to determine the accurate loan amount you can avail against your ornaments.
Pick the Right Loan Amount
Apply only for the loan amount you need, don't borrow more than required. This will reduce the interest and principal amount you need to repay, allowing you to maximise gold loan benefits. For instance, if you need ₹2 lakhs to renovate your home, take a gold loan of that amount rather than the maximum limit sanctioned. Remember, you will have to pay interest on the full loan amount till the time it is repaid.
Choose the Right Tenure
Opt for the shortest possible loan tenure according to your repayment capability. Gold loans can be availed for anywhere between 3 months to 2 years or more, depending on the loan provider. The interest rate is lower for shorter-tenure loans. For instance, consider a 1-year loan if you can repay it comfortably within that timeline. This will ensure you pay less interest overall compared to a 2-year tenure and maximise gold loan benefits.
Make Timely Repayments
Interest accrues on gold loans on a monthly basis. So make sure to pay monthly interest amounts itself to avoid unpaid interest getting added to your principal. One of the most prominent gold loan repayment tips is to set up auto deductions of the monthly interest from your bank account. This is an easy way to avoid missing payments. You can repay the principal in a lump sum at the end of the tenure or in Equated Monthly Instalments (EMIs). Timely repayments will limit your interest payment and prevent penalty interest rates.
Prepay Loan if Possible
Consider prepaying the loan amount if you come into funds from other sources. Most financial institutions allow part-prepayment after a few monthly repayments. Prepaying will reduce your overall interest burden. Some financial institutions charge a minimal prepayment penalty, so check if applicable. Full prepayment can save you a significant amount compared to paying monthly interest till the end of the tenure.
Renew or Top Up When Needed
Gold loans can be renewed on maturity if you are unable to repay within the tenure. You can also top up your existing gold loan within your approved limit if you need more funds later. This saves you the need to reapply. Renewing or topping up your loan allows you to continue enjoying the benefits. However, always assess your repayment capability before renewing or extending your gold loan.
Optimise Your Eligibility
You can improve the chances of your gold loan eligibility in the future by adding more gold jewellery to your collateral. Consider using wedding gifts of gold that may be lying unused or making periodic gold investments. Pledging additional gold ornaments offers scope to top up your loan amount as and when needed.
Conclusion
Availing a gold loan against your idle gold and ornaments is a smart way to supplement your income after retirement. Follow these tips to maximise gold loan benefits such as speed and convenience, minimum documentation, and attractive interest rates that these loans offer. Consult with your family when opting for a gold loan and evaluate all costs involved apart from interest, such as processing fees, valuation charges and prepayment penalties, if any. With smart gold loan decisions, you can make your retirement years more comfortable and enjoyable with some help from your trusted possessions.
