Mistakes to avoid for Gold Loan : The demand for gold loans has increased a lot in the country for some time now. Due to the decline in the income of the people due to Corona, there is an increase in gold loan customers. Less paperwork, flexible schemes and less time taken in disbursement of loan against gold are increasing the demand for gold loans. Especially among the customers of small loan borrowers. But it is very important to take care of some things before taking a gold loan.
How is Gold Loan related to LTV?
Loan to Value (LTV) plays an important role in the case of gold loan. According to RBI rules, you will not get a loan more than 75 percent of the full value of the gold. LTV is the ratio of the loan against the pledged gold. It has an inverse relationship with the market rate of gold. That is, when the rate of gold increases in the market, then you can get more loan. But when the price drops then more gold has to be pledged for the same loan amount.
Loan amount depends on purity of gold
The loan also depends on the purity of the gold. To assess the purity of your 24 carat, 22 carat or 20 carat gold or jewellery, banks or gold taking companies keep a professional loan evaluator. Usually you get a loan of only 75 percent of the value of your gold, but if the price of gold falls, it translates into 80 to 85 percent.
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What are the rules related to gold loan default?
Ankur Gupta, founder and CEO, Ruptok Fintech, says that this is not a good situation because in lieu of giving more loans, banks or gold loan companies ask to pledge more gold or pay the difference in price. If the loan customer does not repay this amount, then he is considered a defaulter. This can reduce his credit score.
It should be well remembered that if after the default period of more than 90 days, the lending banks or gold companies can sell your gold through auction. However, industry experts feel that most banks or gold loan companies generally do not do so as the gold loan amount is often small and of short duration.
(Article: Priyadarshini Maji)