Five Strategies To Save Money On Your Gold Loan: Smart Hacks For Borrowers
A gold loan is one of the most accessible secured credit options. You can get a high-value sanction and flexible repayment options with minimal documentation through an online application. Moreover, the gold loan eligibility requirements are simple, making it a preferred option among borrowers.
Since the interest rate on a gold loan is lower than unsecured loans, many rely on it to keep the cost of borrowing in check. However, there are various other options to make your gold loan more affordable. Once you meet the gold loan eligibility requirements, getting an approval becomes quick and easy. Read on to know these tips that can help you save more on your gold loan.
Compare Different Offers
When taking a loan, many borrowers are quick to choose the easiest option and skip some crucial details. These details may include selecting a lender offering the lowest interest rate. Note that while interest rate plays an important factor in your loan amount, there are other factors you must consider. This includes additional charges and processing fees which can differ between lenders. Hence, when applying for a gold loan, it is important to compare multiple lenders to find a better offer.
With online gold loans, you can easily get competitive offers based on your gold loan eligibility and requirement from the convenience of your home.
Negotiate for Lower Interest Rates
Once the lender determines gold loan interest rates and repayment conditions, you can always negotiate for a lower interest rate. It is important to note that lenders are open to negotiation on interest rates and other conditions, especially with secured forms of credit like gold loans.
Further, if you have a good credit score and a strong repayment history, you can leverage that option to get a better offer on your gold loan interest rate. After negotiations, lenders may offer you a lower interest rate, based on your gold loan eligibility and loan amount.
Read the Terms and Conditions
Once you have compared multiple lenders, read the terms and conditions of repayment carefully. This includes hidden and additional charges. Hidden charges may include the following:
⦁ Stamp duty cash handling penal interest
⦁ Part-payment charges
⦁ Auction charges
Additional charges and fees are other costs that may add to your overall loan amount, such as late payment charges and loan processing fees.
Evaluate Different Repayment Options
To save money on your gold loan, consider the repayment option that best suits your requirements and budget. When you take a gold loan, there are a number of flexible repayment options you can select from, some of which include:
⦁ Standard EMI OptionThis is the most common method of paying EMI. With this option, you pay the principal amount and interest every month.
⦁ Interest-only Option
If you plan to pay only a small amount every month, you can select this option to pay only the interest amount. After the loan tenure is over, you can make a lump sum payment of the principal amount.
⦁ Bullet Repayment
In a bullet repayment option, you can return the borrowed money all at once, instead of repaying in smaller instalments. This enables you to use the loan amount for a longer tenure, so you can repay the entire amount in a single go, at the time of repayment. The amount you repay at the end of the tenure includes the principal amount along with the interest charged on it.
⦁ Partial Payment Option
Depending on the lender’s terms and conditions, you can also pay interest and principal amount via regular monthly instalments.
Assess Your Loan Amount
The key factor to saving money on a gold loan is to only borrow the amount you require. This is because a higher principal amount will attract a higher interest rate, and vice versa. This is to ensure that an increased higher interest rate compensates for the risk associated with your loan.
To avoid paying any additional interest, you must only apply for the loan amount you require. Thus, assess your requirements before applying for a loan with any bank or NBFC.
Check for the Balance Transfer Facility
Another strategy to save more on your gold loan is to transfer it to a lender offering a low-interest rate. Using a gold loan EMI calculator, you can compute your monthly instalments well in advance. This helps you determine how a high-interest rate loan may require you to pay more than the principal amount, increasing your overall borrowing costs. Thus, you can save a lot in the long run by transferring your loan to a lender offering a lower interest rate.
To transfer the gold loan, fill out an application for a balance transfer with the new lender. Then, you can start the process of the balance transfer by communicating the information with your existing bank or NBFC.
Choose the Correct Loan Tenure
To save money on your gold loan, it is ideal to clear the total loan amount as quickly as your budget allows. You can close your loan early by choosing a shorter tenure on your loan. However, note that with a shorter tenure, you will pay a higher EMI.
In some cases, lenders may even levy a higher rate. Thus, a shorter tenure is a better option if you can afford to pay a higher monthly payment. You can always use a gold loan EMI calculator to calculate your monthly instalment, helping you plan your finances better.
Plan for a Pre-closure of Your Loan Account
Pre-closure refers to closing a loan account before the actual tenure of your gold loan ends. To pre-close your loan account, you can pay the complete outstanding amount. However, some lenders may levy 1%-4% on your outstanding amount as pre-closure charges. A few others may even forgo the pre-closure charge on gold loan repayment. Hence, opting for a lender without any such additional charge will help you save more on your gold loan. With these tips, you can enhance your gold loan eligibility and get the most out of your asset. Keeping your borrowing costs affordable helps ensure that you can also work towards securing better financial growth.
