Forced To Prepay The Gold Loan? Here's What You Can Do
If the value of the pledged gold has fallen, you will have to prepay the loan. Know 2 things to do when you are forced to prepay the gold loan!
Indians have a special place for gold, primarily used during religious and auspicious occasions. However, gold owners who need capital to cover various personal expenses utilise gold ornaments to acquire funds through gold loans. Once taken, the lenders charge interest, which the borrowers must repay along with the principal amount within the loan tenure.However, lenders may force you to prepay the total outstanding loan amount even if you have not defaulted in paying the past EMIs. This article will take you through the steps on loan prepayment, how to pay the loan prepayment penalty and other prepayment charges.
What To Do When You’re Forced To Prepay The Gold Loan?Most borrowers believe that lenders are wrong when they ask for loan prepayment before the completion of the loan tenure. However, they are within their rights to ask the borrower to prepay the gold loan. The one reason for such a demand is a drop in collateral value, i.e., the gold asset. If the value of the pledged gold has fallen sharply, you will have to prepay the loan and incur a loan prepayment penalty and prepayment charges.
However, in such a situation, the lender may offer two options to the borrower.
1. Part-RepaymentLenders offer the loan amount to the borrower based on a predetermined Loan-To-Value ratio, which is between 75-90%. This percentage is based on the total value of the gold ornaments in the domestic market. Since the value of the gold in the market has fallen, the lender may offer the option to make a part prepayment of the outstanding amount to equalise the LTV ratio as it was at the time of availing the gold loan. Lenders are known to waive foreclosure penalties and charges if the borrower utilises this option.
2. Pledged CollateralIf you do not want to prepay the loan, you can opt to increase the pledged collateral. In such a case, you will have to provide more gold ornaments to the lender to equalise the LTV ratio as it was at the time of availing the gold loan. This way, you avoid paying cash to the lender if you have more gold ornaments, and you can make timely repayments to take back the gold.
Avail of an Ideal Gold Loan From IIFL FinanceWith IIFL Gold loan, you get industry-best benefits through our ideal loan management system and a process designed to offer instant funds based on the value of your gold 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: What are the interest rates on IIFL Finance Gold Loans?
Ans: The interest rates on IIFL Finance gold loans are between 6.48% - 27% p.a.
Q.2: What are the MTM charges?
Ans: MTM charges on IIFL gold loan are the lowest in the industry at a flat Rs 500.
Q.3: What is the gold loan eligibility?
Ans: The primary eligibility criteria are as below.
• You must be a salaried employee/businessman/businesswoman/trader/farmer or self-employed professional.
• You should be between the age of 21-70 years.