5 Things You Didn’t Know About Calculating Gold Loan Interest
This article covers everything you must know about gold loan interest & the common terms used in the calculation process. Visit to know more details!
Gold loans are an ideal product to raise funds by pledging gold articles as collateral. However, it is critical that you know certain things about calculating the gold loan rate of interest.
Why Is It Important To Calculate Gold Loan Interest?
When you take a gold loan, the lender levies an interest rate that you have to pay monthly over and above the principal amount. Called loan repayment, the interest rate payments create a financial obligation on the borrower to avoid defaulting on payments.
But, what if the gold loan interest rate is higher than what the borrower can afford? Since defaulting on interest payments negatively affects the credit score, it is important to take a gold loan that comes with an affordable interest rate. Hence, it becomes critical that you calculate the interest on a gold loan even before taking the gold loan.
Five Things You Didn’t Know About Calculating Gold Loan Interest Rates
The more you know about calculating the gold loan rate of interest, the more you can benefit from the availed gold loan. Here are the five things you should know about calculating gold loan interest rate:
• The Loan Amount:
One of the most important factors in calculating the gold loan interest rate is the loan amount you want to get from the lender. Technically, the loan amount determines how much gold you have to pledge and the interest on the loan. The higher the loan amount, the higher the interest rate will be, depending on the chosen loan tenure.
• The Type Of Interest Rate:
Borrowers always think that there is only one type of interest that remains fixed every month. However, lenders may charge other types of interest on their gold loans. For example, the borrower may charge compound interest (charged on accrued interest), jumping interest (increases every month), EMI (interest on a portion of the principal amount), or penal interest (charged if you have not closed your loan account after maturity). Hence, it is important to know the type of interest beforehand.
• The Loan Tenure:
Loan tenure is a vital factor in calculating the gold loan rate of interest. The loan tenure specifies the period of your monthly loan repayment obligations. If everything remains the same, the higher the loan tenure, the lower the interest rates will be, as you will have more time to repay the gold loan. Hence, you should consider the loan tenure while calculating the gold loan interest rate.
• The Financial Entity:
The interest rates are highly influenced by the charges levied by the financial entity from which the gold loan is taken. For example, if the entity has other fees attached to its gold loan, the interest rates are generally higher. Banks impose a processing or valuation fee of 1-2%, while most NBFCs do not levy such fees. Therefore, the costs and charges are also a factor to consider while calculating the interest rate on gold loans.
• Loan Calculators:
Most people do not know about loan calculators that can provide an effective means to calculate gold loan interest rates. Loan calculators are online tools that allow the borrower to calculate interest rates based on selected factors such as loan amount, gold value, and loan tenure. If you already know the quantitative value of such factors, you can use a loan calculator to calculate the interest rate on the gold loan accurately.
Avail A Gold Loan From IIFL Finance
With IIFL’s Gold loan, you get industry-best benefits through our hassle-free loan application and disbursal process within 30 minutes of application. IIFL Finance Gold Loans come with the lowest fee and charges, making it the most affordable loan scheme available. With a transparent fee structure, there are no hidden costs you have to incur after applying for the loan with IIFL Finance.
Q.1: Can I get the desired gold loan interest rate?
Ans: Yes, you can get the desired interest rate on your gold loan by setting your desired loan amount, the value of gold, and the loan tenure accordingly.
Q.2: Is it important to calculate the gold loan interest rate beforehand?
Ans: Yes, it is wise that you calculate the interest on your gold loan beforehand to understand your financial obligations and manage your finances accordingly. It can also allow you to determine the gold loan amount you can attain.
Q.3: How can I use a loan calculator?
Ans: You can use a loan calculator by selecting your loan amount or the value of gold along with the loan tenure to calculate the interest rate on the gold loan.