Taking out a gold loan has become more accessible than ever, thanks to the quick online and doorstep application process. However, borrowers sometimes still lack enough information on how to streamline gold loan repayments for better debt management. Ideally, the first step towards doing so is to find out the different ways to repay a loan.
Here are 5 popular ways to repay a gold loan; take a quick look at them to help you select the most suitable one.
1. Pay the interest first and principal later
In this repayment arrangement, borrowers need to pay the specified interest component of a gold loan. The borrowed sum, i.e., principal amount, needs to be paid fully on maturity.
This option works in favour of borrowers who do not necessarily have a regular income or cash flow to service a loan's principal and interest component at once.
However, because of the minimum repayment, the interest accrued on loan would amount to a higher sum. Hence, before opting for this gold loan repayment option, applicants need to gain full insight into the resulting cost of borrowing.
2. Opt for regular EMI payment
This particular option is standard when it comes to repaying most loans. In this arrangement, borrowers have to repay the principal amount and interest in EMI from the month following loan disbursement.
The monthly repayment is considered most suited for borrowers with a steady income or cash flow. Repaying a percentage of the principal component from the tenure’s start, makes this option the one with the lowest interest burden.
3. Choose bullet payment at tenure-end
This gold loan repayment arrangement does not require borrowers to pay monthly interest. However, the same has to be paid along with the principal component at the end of tenure.
For instance, suppose Rakesh has borrowed a gold loan of Rs. 3 lakh for a tenure of 12 months @ 9.5% interest. He also opts for bullet repayment that does not require him to pay any interest or principal component throughout the tenure.
On maturity, Rakesh will pay not only the principal component of Rs. 3 lakh, but also pay the applicable interest amount accumulated on loan. The catch with bullet payment is that the interest amount is calculated on the entire borrowed sum and not on the reducing outstanding balance, elevating one’s cost of borrowing.
4. Make use of partial payment
Borrowers get an option to make partial payments towards their active loan as and when they have substantial savings. In this arrangement, borrowers pay both principal and interest components partially or in full. Lending institutions allow this, regardless of the pre-set monthly payment schedule.
Typically, interest is computed on a daily basis and on the outstanding loan amount. In other words, when a borrower decides to repay his/her principal loan amount before tenure, the serviceable interest component gets lowered. As a borrower, you can put your bonus, returns on investment, or interest earnings to great use and repay your debt faster.
Bonus: Prepayment and foreclosure of loans
Borrowers also allow prepayment and foreclosure of gold loan account. Some lenders do not levy any prepayment or foreclosure charges if it is paid within a pre-specified window.
These are some popular ways to repay your gold loan. However, besides repayment options, you should also find out the different platforms through which you can repay loan instalments.
Most lending institutions allow borrowers to repay instalments through the auto-debit facility by linking their credit or debit card with their loan account. Lenders may also accept payment via banking apps and other online and offline platforms.
For example, if you take out a gold loan from SBFC, you get the option to repay it through these online and offline platforms:
Opting for online payments make the entire process even more hassle-free.
Conclusion
As an intending borrower of a gold loan, it is crucial to identify the pros and cons of these repayment options. By doing so, you will be able to select gold loan repayment methods that will help you pay off your debt without any hassle.
While at it, find out in detail about applicable rates and charges on your gold loan. This will help compute the cost of borrowing and keep the entire process transparent. Subsequently, apply for a gold loan at the earliest, get in touch with us and request for our Gold Genie to experience our doorstep application process right away.
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