Gold is not just an ornament; it is a financial investment for many people. When you take a loan from lenders or banks by pledging your gold is known as a gold loan. Gold loans are used to overcome a financial problem or contingency. Gold loans are one of the easiest ways to arrange funds when in need, such as business deals, medical emergencies, travel purposes, study purposes, etc. Gold always comes in for rescue in case of a financial emergency or requirement. It is considered one of the best investment options for individuals.
Some folks confuse gold loans with loans to buy gold, but the reality could not be further from this. Gold loan is a type of collateral based loan, where the collateral is the gold that you’re willing to give as a security against the loan. It is one of the cheapest and easiest ways to secure debt funding. For lenders, it is the risk component associated with the debt that makes the interest high, the sole reason behind this is that a lender would want to safeguard themselves in case of loan default, hence they secure themselves by charging a higher interest as a measure to make up for the risk. With gold loans, the risk component of lenders is pretty much covered, since the loan amount is usually a percentage of the value of the gold, hence theoretically there’s little to no risk involved for lenders. Hence, a gold loan is a cheap funding source as the loan is backed by collateral whose value is a strong benchmark and almost never falls in the long term, and the asset is highly liquid.
One of the other reasons people opt for gold loans is the low-interest rates compared to banks’ traditional loans. Gold loans also provide you with an option for flexible repayment schemes. Compared to other loans, repayment of gold loan is usually highly flexible and convenient for the borrower.
There are various repayment process for gold loan, unlike other loans. We have jotted down some of the super easy ways that you can use to repay your gold loans:
One of the common ways to pay the gold loan is through periodic interest. It means that both the principal amount and interest amount will be kept separate from each other. You will be required to pay only the interest amount in equated monthly installments, and the total principal amount can be paid on maturity. It is a suitable option for people who want to keep their monthly installments short.
This option is more suitable for people who don't have enough income or monthly cash flow to be able to pay both principal and interest amounts. However, paying only an interest amount increases the interest rate for every month. Before opting for the periodic interest method, borrowers are advised to consult with their lenders about the interest amount, cost, and options for repayment and select accordingly.
Most gold loan borrowers prefer periodic EMIs. Borrowers are required to pay the loan amount from the month following the disbursement month. It is considered a suitable option for salaried people who have a monthly income flow. The monthly EMI includes both the principal amount and interest amount. It is a quick and easy repayment process of gold loans as it deducts from your account monthly. Usually the interest component in the monthly payments decreases over time. During the initial phase - in each monthly payment the interest component is high and the principal is low but as EMis are paid, gradually the interest component becomes less and the principal repaid component becomes higher. Periodic EMIs help pay off both interest as well as the principal over time and is useful to both lender and the borrower in a way. For borrowers, the loan amount is gradually decreased over the loan term and they don’t have to worry about making a larger payment solely towards the principal repayment. For Lenders, it is beneficial as this releases liability on the borrower which means the risk associated with the lending decreases gradually and more principal is freed up to be disbursed in a form of loan. Gold loan repayment in the form of periodic EMIs can be great for borrowers with expected cashflow which can be utilized for repayments.
You can also automate the monthly repayments if you prefer for easy payment. The periodic EMI option also helps reduce the liability of interest as the loan term progresses. The loan foreclosure gets easier after time.
Bullet repayment is a method in which the borrower is required to pay interest and principal amounts at the end of the term of the gold loan. During the loan tenure, you are neither required to pay the interest nor the principal amount. You will pay the entire amount when the loan term is completed. It is known as bullet repayment because you pay the whole amount at once at the end of your loan term. This is a great repayment method for the borrowers who have funding constraints, as it allows the borrowers to efficiently use the capital for a longer term without worrying about interest and principal repayment. They can utilize the loan well over time as the repayment time frame is usually far away from the date of borrowing. For lenders, these repayment structures carry more risk than other repayment schemes as the chances of default are on a higher side, and for a fixed period of time there is no repayment in any form, be it interest or principal repayment. This is easy gold online payment to pay off the outstanding sum. Bullet repayment gold loan is a great way to do gold loan repayment easily!
The interest is calculated for each month, but you will be required to pay the whole amount of interest along with the principal amount when the term ends. It is simple and doesn't put a monthly burden on the borrower.
Another method to repay the gold loan is to make partial payments. You can make partial payments of the principal and interest amounts as per your needs and requirements. Following the EMI system is not important in this type of gold repayment method. You can set up your gold loan payment scheme online as you desire with your lender and make the payments wholly or partially of both the interest and principal amount.
Partial payment is a great way to accelerate your gold loan settlement, the borrower can pay regular interest payments, and as and when there is a surplus of cash, payment towards principal repayment can be made, this makes it really convenient for the borrowers who want to have flexibility with repayments, in most cases where there is a higher flexibility we see higher probability of successful repayments. Doing quick partial payments may also help you secure favorable lending terms with the lender for future debt financing.
Another option for easy repayment of the gold loan is through an overdraft account. Many banks such as DCB Bank and SBI (State Bank of India) offer overdraft options against the pledged gold to the borrowers. These accounts act as transactional accounts, and people can pay the monthly interest per the account’s borrowing amount.
Life insurance policy assists in paying the gold loan when the option of paying the total amount is loan interest and principal after the term. It gives you an opportunity to pay the principal amount after the term and interest every month, as or when it occurs.
Gold loan repayment has never been as easy until now! You can repay interest and principal for your active gold loan online by leveraging Indiagold application. The indiagold app is transparent and reliable and easily downloaded through the play store. It offers a user-friendly and transparent experience to the customers to actively track and manage their payments making the process more convenient and hassle-free. This method will ease your process of repaying your gold loan and help you choose any method you like.
You can pay the interest on the gold loan upfront when it gets disbursed. Then, you repay the principal at the end of the tenure and get your gold back. The lender deducts interest on the gold loan from the loan amount and the rest of the balance amount as a loan. This gold loan repayment option is suitable for those borrowers who may find it difficult to make monthly repayments.
Gold loan repayment where you’re repaying interest along with principal as per your convenience is an additional flexible option. This scheme provides the flexibility to pay according to financial capability but on the EMI schedule. You can make complete or partial payments of the interest and principal amount based on your cash flow.
Thus, we can say that there are various options that a borrower can opt for gold loan repayment. The repayment has never been this easy. A variety of options allow borrowers to take gold loans immediately without any additional burden. They can repay the interest and principal amount as they like. They can select the tenure of the gold loan as per their requirements.
indiagold offers all these repayment options to the borrowers on gold loans. indiagold provides a quick release guarantee, low-interest rates, minimal documentation, and instant disbursal process for easy gold loans.