Top 5 Gold Loan Mistakes

Check and understand gold loan risks before applying for it. Avoid the common gold loan mistakes for quick loan approval and cash access without delay. Apply for a gold loan at your doorstep through gold Genie.

Is Gold Loan Risky? Avoid these 5 Mistakes

Gold loan is among the most popular secured financing options that allow leveraging gold holdings to access funds during a financial emergency. While applying for a gold loan is simple, half-baked knowledge about the application process and requirements is one of the biggest mistakes that could lead to loan rejection.

To prevent that and simplify the application process, you should know about the common mistakes that can jeopardise your funding access.

For the jumpstart, here are the most common gold loan mistakes to avoid at all costs.

5 Top Mistakes to Avoid When Taking a Gold Loan

Avoid these mistakes to simplify the application and repayment process:

Most borrowers check the interest rate and do not even try to find out its type, let alone other accompanying costs of a gold loan. This way, borrowers often end up paying more than what they bargained for when applying for a gold loan.

As a borrower, it is vital to find out about charges such as foreclosure, processing, penalty, and auction charges in advance to gain a clear idea about the cost of borrowing. Additionally, it is equally important that you determine whether the lender is levying fixed or floating interest rates and which one would be better for you.

This gold loan mistake can inflate your cost of borrowing. Typically, individuals compare the interest rate and additional charges levied by leading lenders to choose the most one with the best features to offer. Skipping this part could rob you of the opportunity to save money on the cost of borrowing.

Also, it could prevent you from finding the best deal in terms of features and repayment.

Some financial institutions may follow more than one repayment structure.

It is crucial to learn about them and understand different structures to pick one that suits repayment capability and needs the best. Ideally, there are four different types of repayment structures – EMI, partial payment, bullet repayment, and only interest EMI.

Get in touch with us to know more about the different repayment structures accompanying gold loans and how different they are from one another.

Some applicants often do not feel the need to determine which quality and form of gold can be used as collateral. However, it is vital to determine the quality benchmark and the form of gold lenders accept to sanction a loan.

Typically, lenders set a minimum purity criterion of 18-22 carat to accept gold objects as collateral. Essentially, only the weight and purity of gold objects are weighed to determine their value.

Similarly, most lenders accept gold jewellery and coins of only a certain weight and purity as collateral for a loan. Hence, before dropping in your loan application, find out about these requirements for smooth processing and minimising the risk of rejection.

     5. Overlooking lender's credibility 

Many borrowers often overlook the credibility of their lenders. Now, a gold loan is a secured financing option, meaning that creditors will recover the money lent in one way or another. However, the same ease does not come by for the borrowers if they fall prey to fraud. In other words, not checking lenders' credibility exposes borrowers to the risk of getting duped, where the lender does not release the collateral even after the borrowed sum is repaid.

Besides these, applicants often ignore the terms and conditions laid down by the lenders for prepayment and collateral treatment in case of default. Ignoring the fine print often leads to missing out on crucial information. Hence, for a simple borrowing experience, avoid these gold loan mistakes by finding out all the requirements in detail.