Mistakes To Avoid When Buying Gold To Get A No-Hurdle Gold Loan

Gold is the preferred asset for any class of India at any financial literacy level. The World Gold Council estimated in 2020 that Indian households hoard about 25000 tons of gold. Using this gold, people approach banks, NBFCs, and pawnshops to get loans against ornaments during times of financial difficulties. Banks are also allowed to offer loans against gold ornaments and other jewelry. People most commonly approach pawnshops to get financing for their gold or jewelry to get a no-hurdle gold loan. It’s safer for bigger amounts, starting from Rs 10,000 to Rs 20 lakh, to approach an institutional lender like Manappuram finance or Muthoot finance. Gold Loan is one of the most prevalent sources in exchange for money. Hence the jewelry finance market is steadily growing.

There are many people out in India that still don’t have bigger amounts of gold. Below are a few pre-requisites or precautions that people should understand and take before buying gold.

Understand what you are buying

It is very important for people to know the current price of any precious metal they want to buy whether it is gold or silver. Being careful on this step is advisable and always have a second opinion to know the exact amount of gold that you are buying or have already bought.

One should always check the gold’s purity before buying as there are different types of gold to get a no-hurdle gold loan. Their purity can be either 97%, 98%, 99%, 99.10%, 99.99% or 100%.

Don’t buy gold only when its price rises

There is never a wrong time to buy gold and the increase in people wanting to buy gold increases with the demand. As demand for any product increases, so does the price. Whether it’s gold, silver, gas, grain, or foreign currency, prices increase and supply can run low. Jewelry such as gold and silver should be bought with utmost care and knowledge.

Check the dealer’s experience & reputation

“You must be sure you always go to a trusted source and reputable seller and if you are uncertain don’t commit. Be sure that you can take physical possession of the gold and do not commit to paying any fees or deposits until you are certain it is legitimate, from a trusted source and insist on seeing the certification”, says Clark.

Here are a few mistakes that people perform while getting loans against gold:

Not checking creditor’s credibility: A gold loan is a secured loan to get a no-hurdle gold loan, which means that it is protected. This collateral is kept with the creditor till the loan amount is completely paid back. In case a borrower does not repay, the creditor uses the gold to get back some or all the amount originally owed by the borrower. But what about the borrower? What if the creditor turns out to be a fraud? There is only one way to ensure security for borrowers and that is to trade with only well-established banks.

Compare your options:

Is there a fixed formula to get the best gold deal?  Or it depends on the requirements of the borrower. However, one should compare all options before signing the papers. The first offer that you get may not be the perfect one for you. Therefore, research as much as you can.

Consider the repayment structure:

Understanding loan repayment terms will help plan the finances and avoid any issues or defaults. Knowing about how will you repay prevents people from getting scammed.

Get the LTV Calculation:

LTV stands for Loan-to-Value Ratio and is majorly used by creditors. Creditors use LTV for risk assessment for the borrower. The value of your gold is calculated and based on that they usually give a loan amount of up to 75% of its total value. 

It is easier to get finances for high carat gold to get a no-hurdle gold loan. The documentation is usually minimal, and the approval happens very quickly. Kamdhenugold in Chennai offers gold loans easily. This blog highlighted the do’s and dont’s of buying gold and getting a gold loan.