Factors Affecting Gold Loan Interest Rate Calculation

There are various factors that influence your gold loan interest rates when applying for a gold loan from lenders. Read to know the 4 factors here Now!

30 Jun,2022 07:01 IST 359
Factors Affecting Gold Loan Interest Rate Calculation

The gold loan interest rate is a critical factor that impacts your finances. Therefore, it is important to understand the interest rate calculation and the factors that lead to its fluctuation. Listed below are the factors that can help you learn how to calculate gold loan interest.

1. Credit Score

Your credit score or CIBIL score is a reflection of your creditworthiness. A good credit score indicates that you have made timely repayments without defaults. Lenders grant lower gold loan interest rates to people with higher credit scores. A lower CIBIL score leads to higher interest rates.

2. Benchmarking

Benchmarking rates can be of 2 types – MCLR linked lending rate and Repo Rate lending rate. Lenders may choose any of the two benchmarking rates. When the RBI changes its repo rate, the gold loan rates will also change.

For instance, if the Reserve Bank of India decides to cut the repo rate by 40 basis points, the lending rate will also have to be reduced by 40 basis points. 20 basis points will lessen the MCLR-linked lending rate.

If the interest rates are linked to the repo rate, EMIs will change every three months. The gold loan rates will change every six months or a year if it is linked to MCLR.

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3. Principal Amount

The quantity and quality of gold you pledge directly affects the loan amount you get. Loan-to-value ratio or LTV is the proportion of an asset's value against which a lender is willing to provide the loan. The  RBI mandates that the LTV should lie between 75-90%. Lenders may choose to decide on a lower LTV.

The loan amount you are sanctioned plays an essential amount in determining the interest rate. Sometimes, a higher loan amount also increases the amount of interest to be paid by the borrower.

4. Monthly Income

Lenders review your monthly income before approving your gold loan at the subsequent interest rate. Your income indicates your ability to repay the loan amount. Often, the higher your income, the lower the gold loan interest rate. However, a low income may also affect your eligible loan amount.

Get The Lowest Gold Loan Interest Rate With IIFL Finance Gold Loans

IIFL Finance Gold Loan has various schemes with interest rates starting as low as 0.99% per month. You can walk into any of our IIFL branches pan India, complete e-KYC within 5 minutes and be eligible for getting money within 30 minutes. You can also apply for a gold loan through the IIFL app and receive cash for your gold right at your doorstep!

Frequently Asked Questions

Q1. Are There Other Gold Loan Charges Involved Apart From Interest?
Ans: Yes, these charges include processing fees, documentation fees, valuation fees, payment default fees, etc.

Q2. Is Bullet Repayment Allowed For IIFL Finance Gold Loan?
Ans: Yes, along with EMI, bullet repayment is also allowed. To check the loan prepayment charges, reach out to the customer portal at IIFL Finance.

Q3. Is The Documentation Process Cumbersome?
Ans: No. Gold loans are the most secured assets on a lender’s books. IIFL Finance asks for minimal documentation/KYC and optional income proof from their borrowers.

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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