Last updated on May 30th, 2021 at 05:06 pm
The Indians buy lots of gold jewelry. It can be in the form of jewelry for weddings or coins and bars for investments; the intrinsic value of the gold is revered and treasured the world over. Banks and lenders are aware of the amount of the gold, and they appreciate it, as long as gold is of specific weight and purity.
Gold is valuable because it is rare to find and the fact that processing as well extraction takes a lot of time and effort. Whatever the form of gold is, the essential worth of gold remains tied into the global factors of demand and supply – the significant value is given.
How to Leverage Gold Against a Bank Loan
If an individual has gold and is in dire need of cash, then the individual should go to the bank with gold, and it will help him/her to get a gold loan. A loan against gold can be quickly paid out against the security of gold, which is kept as collateral. Acquiring the loan is more comfortable when gold is held as a security, the tenure options are varied, and interest rates are low. Banks feel safe with having the knowledge that the loan given by them is secured, and they can use gold as the leverage for the benefit of a preferential rate of interest and near-instant loan approval.
When and How to Buy and Sell Gold
The individual needs to keep a close eye on the gold price movements. The most reliable, most basic, and the oldest way of making money off the commodities is with the help of buying low and selling high. The individual needs to look out for the global indicators and the factors that are affecting the gold rates and make well-timed and smart purchases.
There is a very slight chance that the gold rate will be falling lower than the individual’s purchase price by a considerable margin, and it’s a certainty that the individual’s gold will be appreciated over a few years and is going to be a lot more valuable. So the individual needs to buy when the prices are low and not sell it for two to three years no matter what the price fluctuations are. After 2-3 years, the individual can find the highest price and then sell it. It is never a great idea that the individual sells all of his/her gold; instead, there should be some gold left behind to fall back on. So once the selling is done, the individual is required to wait for some time when the gold rates become low and then buy some more.
Benefits of Loan against Gold
The individual should remember the higher the gold rate is at the time the person needs to take the loan, the higher the individual’s loan amount will be because the individual’s gold will be worth more than what he/she bought it for. It is going to be worth on any of the given days, and all of the transactions that are relating to the individual’s gold will be done on that rate, regardless of the rate that it was on the date when the individual purchased it.
So, if an individual wishes or needs to take a loan, he/she should open up his/her gold locker and take their respective gold to the bank. The benefits of taking a gold loan can work in favor of the individual when the person is paying back, as it will be easier to pay back a loan that has been taken at a lower interest rate at the tenure option of the individual’s choice.
A loan that is secured against gold is known as a gold loan. The borrowers in return of the investment are required to give collaterals in the form of gold. The gold is paid back to the borrower once the payment has been made. The borrower might sometimes find it challenging to pay the loan on time. It leads to various consequences that differ from one lender to another. Thus, it becomes essential for the borrower to pay gold loans within a specific time frame.
The lender can send legal notice to the individual at his/her registered address. The credit score or credit history of the individual also goes down. Credit history plays a vital role when the individual applies for a loan application. Approval or rejection of the loan application is dependent upon the credit score. Reminder calls are given to the individual if even a single installment is missed by him/her. These reminder calls are made until the individual makes the payment.
The reminder calls are made purposely so that the borrower cannot make up the excuse that the reminder was not provided to him/her. Some of the lenders also charge penal interest. The lender has the authority that the gold installments can be auctioned if a loan payment is not made on time.