As gold loans come with simple to-meet eligibility parameters, it would not be incorrect to say that nearly anyone can secure the required funds by pledging gold ornament in the form of security or collateral. Lenders levy a lower rate of interest on this credit option than any unsecured form of credit like a personal loan. On repayment, creditors return the security asset.
Precisely owing to the security-backed nature, Rupeek gold loan, Muthoot gold loan, SBI gold loan or gold loan offered by any other lender have lower borrowing costs, which makes them one of the best choices for most individuals. This said, repaying the loan against gold can at times come across as a burden due to other financial needs. So, let’s look out at some of the crucial ways of managing gold loan repayment well.
What are the prudent ways to lower the gold loan repayment?
Mentioned here are six simple ways for managing gold loan repayment well –
· Refinance with a lower rate of interest
· Make part prepayment or prepayment
· Go for the shorter repayment tenure
· Prioritise monthly repayments
· Go for the bullet repayment
· Borrow the amount you need
Let’s consider the below-mentioned details –
Borrow the required amount you need
It is crucial to make sure you apply for only the required loan proceeds that you need. Nothing more and nothing less. Borrowing tends to come across as a cumbersome option. You require paying interest constituent on the excess proceeds. In the case you are a new applicant, you must ensure to estimate the needed funds to avoid paying higher charges on interest. Ensure to note that the lower your loan proceeds requirement, the lower rate of interest charged. Even if you qualify for high loan proceeds, sticking stringently to the need is crucial. Applicants can make use of the online gold loan EMI calculator to decide the maximum loan proceeds they are eligible for pledging their gold jewellery. Also, you tend to know the apt gold loan interest rate as per your need. For instance, suppose you have zeroed in on a lender like Rupeek gold loan, then you can make use of an online gold loan calculator to compute the Rupeek gold loan interest rate preferable as per your need and negotiate the same with the lender for the same deal.
Go for the bullet repayment option
In the case you opt for the bullet repayment option, then here you are required to make the payment of the principal proceeds along with the interest constituent by the end of repayment tenure. You do not require following any loan EMI schedule. As you repay the loan in a single go, this kind of repayment is called a bullet plan.
Prioritise monthly repayments
Once the estimated loan proceeds are finalised, you must look for the lender providing the highest gold rate per gram at a suitable rate of interest. As the applicable interest rate directly impacts the monthly payable, it is crucial to perform in-depth market research before opting for a lender. The higher the rate of interest charged, the higher would be the loan EMIs.
Go for the shorter repayment
Unlike an interest rate, the loan repayment is inversely proportional to the loan EMI. In simpler terms, if borrowers go for the higher repayment period, they will have to incur a lower loan EMI while shorter repayment enhances the monthly amount payable.
Make the part prepayment or full prepayment
One of the prudent ways to make substantial savings on gold loans is via part prepayment. Reputed lenders generally charge no fees on gold loan part prepayment or prepayment. The existing gold loan consumers can conduct small part prepayment accordingly by using additional finances, like returns generated from freelancing projects, investments, and others. Every part prepayment of over-the-loan EMI gradually lowers the principal constituent, making the repayment of the loan convenient.
You can even foreclose the loan against gold to save up for the interest outgo. However, in the scenario of loan foreclosure, you must remember that lenders might impose foreclosure fees if the rate of interest is incurred at a fixed rate. So, it is crucial to look for a lender that provides nil to negligible prepayment or foreclosure fees.
Refinance the lower rate of interest
It is even a feasible choice to manage the repayments of gold loans. Existing customers serving gold loans at higher interest rates can go for the refinancing option from lenders providing a comparatively reduced rate of interest. This would assist them conduct substantial savings on ongoing loans.
While the rate of interest plays a vital role with respect to loan EMI, this must not be the only parameter considered. You must remember that loan refinancing is like a fresh loan application with another lender. So, the processing fees and various other linked charges must even be factored in.
Also, going for the loan refinancing by the end of repayment tenure results in further borrowing expenditure. Hence, all such parameters must be factored in before planning for the gold loan transfer option. You must read all the terms thoroughly before going for the option.
What are the advantages of considering the gold loan option?
Here are two crucial benefits of opting for a gold loan –
Flexible repayment mode –
Going for the lender providing a flexible structure makes repayment affordable for loan seekers as per their financial potential. Individuals may consider repaying any amount at any time during the repayment tenure with loan EMIs. Also, lenders provide a one-time bullet repayment option.
Compact loan repayment tenure –
Gold loan is one of the preferred choices for potential loan seekers looking for maximum loan proceeds for a short term. A few lenders allow you to go for a six-month repayment frame, extendable of up to twelve months. One of the crucial benefits of this loan is it lowers the interest constituent assisting you make considerable savings on the loan.