As gold loans come with simple and easy-to-meet eligibility parameters, it would not be incorrect to say that almost anyone can avail the required funds by pledging the ornament as security or collateral. Lenders levy a lower rate of interest on such credit facilities than any other kind of unsecured credit option. On repayment, lenders return the asset. Basically, owing to the security-backed nature, loan against gold has lower borrowing costs, which makes it a better option for many the borrowers. This said, making a repayment of a gold loan may sometimes become stressful owing to several other financial obligations. Let’s check out a few of the ways to effectively manage the repayment of your gold loan from lenders like Muthoot, Bank of India gold loan, HDFC bank, Axis bank, etc.
What are the prudent ways to lower your repayment burden of a gold loan?
Here are six easy ways of managing your repayment of a gold loan smartly –
∙ Take up the exact proceeds you require
∙ Go for the bullet repayment option
∙ Opt for a lower repayment tenure
∙ Prioritise monthly repayments
∙ Refinance with a lower rate of interest
∙ Make the part payments or prepayments
Let’s look at the following details –
∙ Borrow just the amount you need
It is crucial to make sure you apply for the exact loan proceed that you require. You must apply for anything more or anything less. Overborrowing may become cumbersome. This is because you require paying the interest on the excess loan proceed. You as a new applicant must ensure to make this a point to better estimate the required proceeds to avoid making payment of higher interest constituent. Ensure to keep in your mind that the lower the loan proceeds, the lower will be the interest rate charged. Even if you qualify for a high loan proceed, sticking to just the requirements is crucial. You as an applicant must ensure to use the online gold loan EMI calculator to not just determine the higher loan proceed you can borrow but to fix an EMI as per your repayment capacity before pledging the gold jewellery.
∙ Go for the bullet repayment option
In the case you opt for the bullet repayment option, you can make payment of the principal amount alongside the interest constituent towards the end of the repayment tenure. You do not require to follow any kind of EMI schedule for making the repayment. As a borrower, you must repay the loan in a go. This kind of repayment option is called a bullet repayment plan.
∙ Prioritise your monthly repayments
Once the estimated proceeds of the loan are finalized, you must look for the lender providing the maximum gold loan rate with every gram at an affordable rate of interest. As the applicable interest rate directly affects the monthly payable amount, it is of high importance to conduct in-depth market research before you select any lender. The higher the interest rate levied, the more will be the gold loan EMI.
Go for a lower repayment tenure
Unlike the interest rate, the loan repayment tenure is inversely proportional to the loan EMI. In simpler words, if you as a borrower choose a higher repayment tenure, then you will require paying a lower EMI while shorter repayment tenure will enhance your monthly instalment amount.
Make the part payments or prepayments
One of the prudent ways to make substantial savings on the gold loan is via a part prepayment route. Reputed lenders generally charge a zero fee on gold loan prepayment. In case you are an existing gold loan borrower then you can make small part prepayments as and when by using the additional funds generated through additional earnings like returns from investments or any freelance project. Every part prepayment i.e., over your EMIs will gradually lower your principal component making the repayments very convenient.
Also, you can foreclose your gold loan to save on interest outgo amount. However, in the scenario of loan foreclosure, you must ensure that the lender may impose foreclosure fees. Here in this regard, it is prudent to look for bank lenders that provide negligible or zero-part prepayment or foreclosure fees.
Refinance with a lower rate of interest
This is even a feasible way of managing your gold loan repayments. The existing bank customers repaying the gold loan at a high-interest rate can route for the refinancing option from the lender providing a comparatively lower rate of interest. This will assist you to make considerable savings on the prevailing loan.
While interest rate plays a major role in determining your EMI constituent, this must not be the only parameter factored in while applying for the balance transfer option. You must remember that loan refinancing is the only fresh credit application with a new lender. Thus, the whole procedure of loan sanctioning starts again and this time it will be less strict as compared to the initial application. Note that the processing fees and other linked charges must even be taken into consideration.
Also, remember that opting for the gold loan refinancing by the end of the repayment tenure results in more borrowing expenditures. Thus, all the above parameters must be taken into consideration before planning for the balance transfer option. You must ensure to read all the conditions well before choosing the option.
Read here to understand the benefits of choosing a gold loan
Flexible repayment mode
Under a gold loan, you are free to select the lender that provides a flexible repayment structure at a lower rate of interest. Thus, you as an individual can select to repay the borrowed loan amount as per your repayment potential without the need for routing for the usual EMI way of making loan repayment. Moreover, when opting for a gold loan, ensure to go for the PSU banks instead of private sector banks. This is because PSU banks tend to provide the lowest gold loan interest rate. For instance, the Bank of India gold loan interest rate would be lower than the interest rate offered by Manappuram Finance, Muthoot, Rupeeq, etc.
Compact mode of repayment
Gold loan is one of the preferred credit options for you if you are looking for maximum loan proceeds for short-term repayment tenure. One of the added advantages of short-term repayment tenure is it lowers your interest constituent, helping you derive maximum savings on the loan.
Zero foreclosure or prepayment fees
Reputed lenders may permit you to make the gold loan part prepayment of your outstanding loan without the need for paying any additional fees.
Competitive rate of interest
When it is about loans, not discussing the benefits linked with interest is nearly impossible. As the month on payable is based on the levied rate of interest, opting for the lender providing the lowest interest rate is a complete must. Most lenders offer gold loan interest rates starting from 9% per annum onwards.
