When it comes to securing a loan, the best option available out there is the gold loan. Available for low CIBIL scores, the gold loan interest rate is usually the least among all the forms of secured loans. Additionally, the gold loan eligibility criteria are simple, making it a popular financing option.
With basic KYC documents, passport size pictures, and some additional income documents, an Indian individual between 18-75 years of age can apply for a gold loan. Also, the additional requirement is that the gold pledged should be between 18-24 carats, and the applicant must be employed in any form of profession.
Before applying for a gold loan, it is equally important to know the various factors that impact the gold loan interest rate.
Factors affecting gold loan interest rate
The gold loan interest is the first thing an individual looks for when applying for a gold loan. Since the eligibility criteria for the loan remains constant throughout the financial institutions, the change that one can expect is in the processing fees and the interest.
The average processing fee for gold loans ranges between 1-3%. The points that impact the gold loan interest rate are as follows:
- CIBIL score
Though even a low CIBIL score is applicable for the gold loan eligibility, this will impact the gold loan interest rate. CIBIL refers to the creditworthiness of an individual, which reflects the repayment history and consistency in payment without fail. In simpler terms, the higher the CIBIL, the lower the interest rate for the loan and vice versa.
- Benchmarking process
The banks and financial institutions use the RBI interest rate benchmark to set the interest rate for their loans. The two forms of benchmarking are the Marginal Cost of Fund-based Lending Rate (MCLR) and the Repo Linked Lending Rate (RLLR). Gold loan rates fluctuate from one lender to the next depending on the benchmarking technique used. If your lender’s gold loan interest rates are linked to the RLLR, your EMIs will change every three months. If the gold loan rates are linked to the MCLR, they will vary every six months or a year. As the Reserve Bank of India adjusts its repo rate, the gold loan rates related to RLLR and MCLR will vary. So, check the gold loan interest rate before confirming.
Loan amount and tenor applied
The loan amount that an individual applies for has an impact on the gold loan interest rate. In the most general sense, the higher the loan amount, the higher the interest rate. At the same time, the loan taken for low tenor is expected to carry a high interest rate. So, the gold loan interest rate is highly dependent on this factor.
Monthly income of the applicant
The gold loan eligibility criteria are quite lenient as compared to any other secured or unsecured loans. Though income is not a big consideration while applying for the loan, it is still a crucial consideration to focus on. The higher and stable the applicant’s income will be, the lower the interest rate for the gold loan.
With simple interest calculation, there are various other benefits of online gold loans as well.
Benefits of gold loan
Though the biggest benefit of applying for the gold loan is the simplicity of documentation and application, there are other benefits. The main benefits of the gold loan are as follows:
- In an emergency, it is the quickest option to obtain cash.
- The applicant’s convenience determines the payback plan.
- The security’s value determines the loan amount.
- The interest rate is modest in comparison.
- It contributes to the security of the CIBIL while protecting the safety of your gold.
When it comes to meeting a person’s financial needs, a gold loan is the best as it is available quickly and easily. The gold loan eligibility criteria are simple; the gold loan interest rate is easy to identify and calculate. To know more about the various pre-approved offers and find out the competitive options, visit the Bajaj Finserv website. The lender offers gold loan finance at the best interest rate with flexible repayment options.