Since gold loans have simple eligibility requirements, it’s safe to assume that practically everyone can get money by putting their jewelry as security. This credit facility has lower gold loan interest rates than any other type of unsecured personal loan. When the debt is paid off, the creditor returns the asset.
Gold loans offer a reduced cost of borrowing precisely because they are asset-backed, making them a viable option for most borrowers. However, repaying a gold loan can sometimes be challenging due to other financial obligations. So, let’s have a look at some of the methods for effectively managing gold loan payments.
What Are the Best Ways to Lighten the Burden of Gold Loan Repayment?
Borrow only what you need:
It is critical to apply for the exact amount of loan that is required. That’s all there is to it! Borrowing too much might be troublesome. The extra loan amount will be subject to interest charges.
To avoid paying higher interest costs, new applicants should always estimate the required amount. Remember that the lower the loan amount, the lower the interest rate charged. Even if you are eligible for a large loan, you must adhere to the requirements.
By pledging their gold jewelry, applicants can use an online gold loan calculator to estimate the maximum loan amount they are qualified for.
Make prepayments or part payments:
Part-prepayments are one of the most effective strategies to save money on gold loans. Part-prepayments on gold loans are normally free of charge from reputable lenders. Existing gold loan customers can make tiny part-prepayments as needed using additional funds such as investment returns, freelancing assignments, and so on. Every part-prepayment above and beyond the EMIs reduces the principal amount over time, making repayments more manageable.
To save money on interest, the gold loan can be foreclosed. In the case of a loan foreclosure, however, it is important to keep in mind that financial institutions may levy foreclosure fees. In this case, it’s a good idea to opt for a lender that charges no or minimal part-prepayment or foreclosure fees.
Prioritize monthly repayments:
Individuals must search for a lender that offers the highest gold loan rate per gram at a reasonable interest rate once the expected loan amount is determined. Because the applicable rate of interest has such a direct impact on the monthly payment, thorough market research is essential before settling on a lender. The higher the interest rate charged, the higher the EMIs will be.
Opt for bullet payment:
Individuals who choose a bullet repayment plan will be able to pay the principal amount as well as interest at the end of the loan term. There is no need to stick to an EMI schedule. This sort of repayment is known as a bullet repayment plan since borrowers repay the debt all at once.
Refinance with lower interest rates:
This is also a viable way for paying back gold loans. Customers who are currently repaying gold loans at a high rate of interest can refinance with a lender who offers a lower rate of interest. This will allow them to save a lot of money on their current debt.
Though interest rates are important in determining the EMIs to be paid. They should not be the only factor to consider when applying for a balance transfer. It’s important to remember that loan refinancing is nothing more than a new loan application with a new lender. As a result, the entire loan sanctioning process begins all over again. Only this time with fewer requirements than the previous application. Keep in mind that processing fees and other associated costs must be factored in as well.
Opt for shorter tenure:
The loan tenure, unlike the interest rate, is inversely related to the EMI. In other words, borrowers will pay cheaper EMIs if they choose a longer repayment term, whereas a shorter term will increase the monthly installment amount.
