Did you take a Gold Loan after seeing the price of gold being expensive? What will be the effect on you if gold becomes cheaper after a few days?

A gold loan is a secured loan and is easily available. It is available based on the market value of your gold. Just imagine that you have taken a loan on the increased price of gold, but after some time of taking the loan, if the price of gold suddenly decreases, then what will happen? What will be its effect on you? Know about this.

Gold prices are unstable, sometimes they increase and sometimes they decrease. A few days ago, gold had reached 1,00,000. Now the prices have come down a bit. Meaning, there is always fluctuation in the prices of gold because the price of gold depends on the currency situation, geopolitical tension and decisions taken by the RBI. Since gold is considered a property, a loan is also available on it. It is a secured loan and is easily available. Usually, banks or any financial institution give up to 75 percent of the market value of gold as a loan. Just imagine that you have taken a loan at a higher price of gold, but what will happen if the price of gold suddenly falls some time after taking the loan? What effect will it have on you? Know about this.

This will be the effect of falling gold prices on you

The fluctuation in gold prices has a direct impact on the borrower. When gold prices rise, the value of the pledged gold increases, due to which the borrower gets more amount as a loan, but if the price of gold falls after some time, then the loan value ratio becomes higher. In such a situation, customers taking loans may have trouble repaying it. In this situation, many times banks or other financial institutions can charge heavy interest from the borrower or ask to pledge additional gold to maintain the loan-to-value ratio.

What are the benefits of gold loan

Gold loan is cheaper than unsecured loans like personal loan, property loan, corporate loan. The criteria for gold loan is quite easy compared to all other loans. Credit score etc. does not matter much in this because the loan amount is given to you according to the value of your gold. In times of emergency, you need money immediately, in such a situation gold loan is helpful for you because it is available even on short notice.

In what circumstances can you choose the option of gold loan

For what purpose you are taking gold loan, you should first consider it. Gold is your property, so decide to take loan against gold only in very important situations. If someone in the family is seriously ill and money has to be arranged for treatment, then you can take gold loan. If you fall short of money for a family wedding and have to borrow money from somewhere, you can take a gold loan and later repay the loan and get your gold back. But taking a gold loan to meet small and trivial needs is not wise.

Keep this in mind while taking a loan

One more thing to note in the case of gold loan is that if you are unable to repay the gold loan within the stipulated time, the lending institution has the right to sell your pledged gold. Usually banks give gold loans for 3 months to 3 years. The tenure of gold loan in NBFC can also be different. In such a situation, before taking a loan, you have to decide for how long you will take the loan and in how much time you can return that loan. If you do not repay the loan on time, you may lose your gold.