Lenders have seen a surge in demand for gold loans in recent months. Many small businesses have used goal loans to manage their cash flow.
To give an example of industry trends, Federal Bank’s gold loans increased 67% year-on-year in the December quarter.
There are a few things to keep in mind when using a gold loan now. Gold mortgage prices have been revised in recent months. Some lenders change their holdings accordingly and encourage borrowers to repay monthly or more often. Muthoot Finance, for example, offers rebates on monthly interest payments.
Most lenders usually offer gold loans for up to a year. According to data from Paisabazaar.com, very few banks, like Mahindra & Mahindra Bank and Bandan Bank, have been lending gold for more than three years. However, some lenders allow borrowers to extend their holdings. The holding period also depends on the loan scheme and the type of repayment option the borrower chooses.
Like many other loans, public sector banks offer the lowest interest rates, followed by private banks. Interest rates offered by non-banks are the highest of all lenders.
Lenders typically accept 18-22 carats of gold ornaments. When offering bank mint coins as collateral, most lenders accept up to 50 grams of coins and a purity of 24 carats.
Gold loans can have multiple charges. In addition to the processing fee, there are stamping fee and evaluation fee. Some lenders can also have foreclosure fees and more.
Lenders can demand more collateral if gold prices fall, as in recent months. If the borrower does not repay or offer more money, the lender can charge a penalty and even sell the gold after some reminders.
What you need to know before using a gold loan in your current scenario
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