Gold loans have been gaining popularity among Indian borrowers. The reason can be attributed to the fact that you can access funds quickly. It is the best way to tide over a financial crisis without putting any burden on your pocket. The loan amount depends on the value of your gold jewelry. The best part is that there is no restriction on how you use the sanctioned loan amount. You can use the funds to cover the cost of a medical emergency, education, wedding, travel, home renovation, etc.
Compared to other loans, the gold loan rate is low and affordable for all. However, it is worth noting that the interest rate depends on factors, such as age, income, credit score, current financial obligations, etc. To get the best interest rate, you will have to convince your lender that you can make timely repayments.
Here are the top tips to get the lowest gold loan rate:
- Maintain an excellent credit score
Besides your income, your lender checks your credit score as soon as they receive your muthoot gold loan application. Your credit score is a three-digit number that has a direct impact on your loan approval and on getting the lowest gold loan rate. Based on your credit score, your lender determines whether or not you are a creditworthy person. Your credit card score shows if you can repay without any default.
The minimum CIBIL score requirement to get a lower gold loan rate is 750. If you wish to secure the lowest gold rate in the market, you will need to maintain a credit score closer to the 900 range. So, while applying for a gold loan, make sure that you have an excellent credit score.
- Choose a lower loan amount
Your loan amount depends on the value your gold items hold. Most lenders offer up to 70% to 90% of the gold’s value as a loan. Since the value of the gold is high, you can secure a high loan amount. However, it does not mean that you can go for a high loan amount just because you can. If you opt for a higher loan amount, you will have to incur a higher interest rate. Lenders usually charge a higher interest rate on a higher loan amount to justify the risks involved.
So, while applying for a gold loan, it would be wise to opt for a lower loan amount. This way, you can secure a lower gold loan ate. Keep in mind that the lower the loan amount, the lower will be the gold loan rate. You can also use an EMI calculator to determine the best gold loan rate based on your affordability.
- Show higher income
Another factor that determines your gold loan rate is your income. Before approving your loan application, your lender checks your income to determine your repayment capacity. Your lender will check if you can repay the loan amount with interest on time. Having a higher income shows that you have a higher repayment capacity. Your lender may offer a lower interest rate if you have a higher income. However, keep in mind that you should not have any current financial obligations while applying for a gold loan.
- Compare lenders
The requirements to get the lowest gold rate while applying for a loan vary across different lenders in the market. So, you will have to shop around and compare different lenders and their interest rates. This way, you can choose a lender that offers the lowest gold loan interest rate. Hence, exploring your options before applying for a loan will reap better rates.
- Choose a shorter loan tenure
Your repayment tenure has a direct impact on your gold loan rate. When you choose a longer loan tenure, your lender considers you a risky borrower and therefore, charges a higher interest rate to justify the risks involved. A higher loan tenure may decrease our EMI amount, but you will have to incur higher interest. If you have the budget, it is advisable to apply for a shorter loan tenure. Your EMI amount may increase, but you will have less interest to pay.
Getting a lower interest rate depends on your eligibility factors, such as your credit score, income, loan tenure, loan amount, current financial obligations, etc. The most crucial part is that you must convince your lender that you are a responsible borrower and can repay the loan amount without any fail.
Before applying for a gold loan, it is imperative to assess your needs and affordability to make an informed decision.