3 Things You Should Know Before Taking a Gold Loan

 Gold loans are a good option for people who want quick funds for emergencies. This could be for a marriage, international education, or medical emergencies. Though a gold loan is beneficial for many people as any non-salaried person can take this loan also you do not need to show your credit score for this loan. But before taking a gold loan one must keep in mind some of the most important things that can affect the interest rate of the loan.

Check the purity of your gold

When you need to put your gold jewellery as collateral do get its purity checked as it is checked to determine the gold loan eligibility. A Karat is a measurement of the fineness of the gold in proportion to the total weight. 18K-24K purity of gold is eligible for a gold loan. Generally, jewellery makers add copper, nickel, aluminium, etc., since pure gold is too malleable.

Check the Loan-to-Value (LTV) ratio

The LTV ratio determines the loan amount and the risk that the lenders take. The loan-to-value ratio is generally higher when the lender’s risk is higher. Choose a loan amount that results in a lower LTV ratio to keep costs in check.

Inspect the market value of gold

The prices of gold are bound to change as its market rate keeps fluctuating due to several factors, including market conditions. This affects the total gold loan interest rates levied by the lender. The price of gold across states differs, which affects the interest rate for a gold loan, too. A higher gold value can get you a loan at a better interest rate.

 These are some of the major factors that affect the gold loan. Remember, when you choose a lender to take a gold loan whether it is a bank or a non-banking financial company, do check its credibility. Look for a trustworthy lender that has affordable loan schemes that are favourable to you.