Meeting unexpected financial expenses becomes challenging considering the inflated economy. Moreover, savings are not always sufficient to fulfill emergency needs. Availing of credit is the only feasible option in such situations. Now, banks offer different Loan options for the same. Gold Loan stands out from the rest as it lets you pledge your ornaments and get a reasonable interest rate.

Most Indians invest in gold. Hence, this is not challenging security to arrange. Moreover, the Loan comes with flexible repayment terms. If you wish to get financial aid in this form, you must consider the Gold Loan interest rates. The impact on the overall Loan cost and your ease of repayment. Interest is the charge against the lending amount repaid in equated monthly installments. Loan providers use these factors to decide the same:

Monthly revenue

There are minimal eligibility parameters in Gold Loan, unlike other credit options. Lenders perform a comprehensive check to determine your eligibility. One of the prominent factors is your income. The higher the revenue, the better is the risk aversion. This automatically reduces the applicable interest. But if your monthly income is less, you get charged with a higher rate to compensate for the risk.

Loan amount

This is another essential aspect taken into consideration. The lending amount primarily gets determined based on the purity and fineness of gold. This directly impacts the interest rate. Higher the loan amount, the greater the interest and vice versa. You get to check this with a Gold Loan Calculator. It is an automated tool that gives you an accurate estimation of the overall cost. Lenders make it accessible on their website for effective planning.

Credit History

Besides income, lenders need assurance on your repayment behavior. They evaluate your credit score for the same. It is a three-digit number that shows the record of your credit behavior. A higher ranking reflects positively, whereas a low score indicates default on your debts. Therefore, maintaining a high score is essential to get favorable interest.

Benchmark Rates

Lenders adjust the interest rate competitively. But before doing so, they must adhere to the benchmark rate. The Reserve Bank of India sets this, and Loan providers are expected to link their rate with the standard. Loan providers increase the interest rate when RBI increases the policy rate and vice versa.

Tenure

Lastly, tenure is directly proportional to Gold Loan interest rates. This depends on the repayment method you choose bullet payment, interest payout at regular intervals, upfront repayment, regular monthly installment, etc. A longer duration results in a higher rate. Hence, choose the period wisely.