Taking a loan is the wisest option to get through an unprecedented financial crisis. This core feature of loans clearly explains why there is a rise in the tendency of people to apply for loans these days. The finance industry has taken advantage of this tendency of people and introduced various loan options, each with its pros and cons.
One such popular option is a gold loan. Under this scheme, a borrower can take loans against the amount of gold that they deposit with the lending organization. Under the loan against gold scheme, articles made from gold of 18K or 24K are treated as collateral.
The increased inclination toward applying for goad loans at present is primarily due to the less criticality in the corresponding documentation process. Secondly, as goal financing considers gold as security, so this loan facility works well for people with low credit scores too.
However, there are cons in the process too. You may lose your gold asset if you do not repay the loan on time. There are various other challenges as well which you might face if you do not make proper background research before opting for an instant gold loan.
Compiled here are some mistakes that you must avoid while applying for instant gold loans. Follow them to get the most out of your gold finance.
Not knowing how to calculate interest rates
As a borrower, lack of awareness on the procedure of interest calculation against the gold asset that you have deposited with the lending institution is your first mistake.
Different money lending companies offer various schemes to their customers based on their specific process for calculating interest rates. For instance, some organizations maintain a fixed and constant interest throughout, while few of them increase the interest charged if you choose a shorter repayment period.
Some organizations also levy a hefty interest charge if there is any defaulter in any month. So, you must know how your lending organization is calculating the interest rate on the loan that you have taken against your gold asset.
Not knowing the repayment structure
Some organizations allow foreclosure of the entire loan amount after a lock-in period of six months. Again, some organizations do not allow foreclosure. Instead, they only have partial repayment schemes. Some organizations even charge an additional interest rate if you want to foreclose your gold finance.
As you can see, every lending organization has a specific repayment structure. You need to understand the repayment structure that is prevalent in your lending organization so that you can optimally benefit from gold loans.
Not knowing about the hidden charges
When you apply for gold loans, you must remain simultaneously aware that there are some hidden charges beyond the regular interest on the principal amount that you have taken. Be mentally prepared that you have to pay these, or else it is considered as a defaulter. Eventually, you will get fined.
These hidden charges may include handling fees, processing fees, penal charges, and so on. In most of the cases, the lending organizations mention about all these hidden charges in the ‘Terms and Conditions’ section of the instructions manual in a detailed manner.
It would be best if you go through these instructions clearly to ensure that you do not miss paying any of these hidden charges and end up getting penalized.
However, some lending companies do not mention these hidden charges in their instructions manual elaborately. Therefore, making a direct inquiry about these hidden charges to the executives at the organization and get everything in writing to avoid problems at a later period is highly recommended.
Not knowing that your asset can be on the auction
If you are taking a gold loan for the first time, you might not know that if you do not repay your loan and make full settlement within the stipulated period, your lender can put your gold asset on auction.
However, there are separate auctioning policies for different lending auctions. So, know about the policies clearly if you wish to avoid such an unfortunate consequence.
Take gold loans but avoid mistakes
Taking gold loans is always good if you need instant finance but lack a good credit score. Nevertheless, it is simultaneously necessary to avoid making mistakes that can prevent you from reaping its benefits optimally.