Gold loans are a popular way to get credit because they can be paid back quickly, there are no restrictions on how the money may be used, and your credit score has little to no impact on whether or not you are approved for a canara bank gold loan. Another crucial point that is frequently overlooked is that there are many ways to repay gold loans.

Besides the usual EMIs, here are some other flexible modes available to repay gold loan.

Bullet payment

The use of a bullet payment is among the best methods of gold loan repayment. It enables the borrower to pay off both the principal and interest of the loan when it expires. The lender will typically bill interest on a monthly basis. Even though the terms for the majority of gold loans range from three months to three years, the “bumper” option typically has terms of up to one year. The bullet repayment option should be taken into account by borrowers who are unsure of how much they will be able to pay back over the course of the loan. The “bullet repayment” option would have the highest canara bank gold loan interest rate because the principal and interest are both paid back at the conclusion of the gold loan’s term.

Only making monthly payments of interest 

In this case, you pay the interest in accordance with the EMI schedule each month and the principal amount when the loan is paid off. Only interest is due from the borrower during the term of the gold loan. For those who don’t make enough money or don’t have enough cash flow to cover the principal and interest payments, this is a good option. 

The borrower will be required to pay a higher interest rate, though, if the principal is not repaid each month. Therefore, borrowers who choose this method of loan repayment should speak with their lenders to learn whether doing so would be feasible and how much it might cost. As a result, the cost of interest would be lower, and it would be simpler to repay the entire principal in one lump sum at the end of the canara bank gold loan‘s term.

Upfront payment of interest

When using this method of loan repayment, the interest is fully paid at the time the loan is granted. The principal of the gold loan must be paid back at the end of the loan’s term. The interest on a loan is typically subtracted from the principal when it is repaid. For borrowers who are unable to make monthly loan payments but would rather have a less expensive option than the bullet payment option, there is the upfront interest payment option. 

The regular EMI payment

Gold loans typically offer the option of regular EMI payments, just like most other loans. Because both the principal and interest must be paid back over the course of the canara bank gold loan in the form of EMIs, the total cost of interest with this method of repayment is lower than it would be with other methods. Regular EMIs are most advantageous to those with steady income and cash flow.

In conclusion, which payment option should you choose?

Borrowers should choose their preferred method of repayment when applying for a gold loan based on how much money they expect to earn and how much money they expect to spend during the loan’s term. Given that the ongoing pandemic has adversely affected many people’s incomes, non-regular EMI repayment options, such as the bullet repayment option, can be advantageous for those with limited cash flow. For those who are confident that they will have a steady source of income, the regular EMI option, which has the lowest canara bank gold loan interest rate of all the ways to repay a gold loan, is the best choice.

It is wise to take into account these other factors when taking out a gold loan, knowing your options for repayment.

total borrowed

Banks and NBFCs are only allowed to lend up to 75% of the value of the gold when making gold loans in accordance with RBI regulations. The majority of lenders currently offer gold loans for amounts between Rs 1,000 crore and Rs 10 crore. So keep that in mind before applying for a gold loan.

the rate of interest

The interest rate you receive for a gold loan application depends on a number of factors, including the LTV ratio, loan term, loan amount, and other variables, as well as how risky the lender thinks the canara bank gold loan is. For instance, a higher LTV ratio means the lender is taking on more risk, so they frequently charge a higher canara bank gold loan interest rate to make up for the higher risk. The typical annual interest rate range for gold loans is 7% to 29%. (p.a). (p.a.).

Term of a Loan

Gold is typically used as collateral for loans with three to five year terms. When choosing the loan’s term, you should think about how much you can afford to repay and choose a length whose EMI you can afford. Utilize an online EMI calculator along with the loan amount, canara bank gold loan interest rate, and term you choose to get a good idea of your monthly payment. The EMI amount increases as the loan term does, and vice versa.

processed fees

Processing fees for gold loans can either be a flat fee or a percentage of the total loan amount, depending on the loan amount. Others may charge a percentage of the loan amount up to 2%, while some lenders may charge a flat fee as low as Rs 10. Before submitting your gold loan application, take into account the processing fee that the lender may impose. The total cost of the loan may be significantly impacted by this fee, particularly for large loans.

Gold’s worth and purity

You can borrow a specific amount of money in exchange for gold depending on its type and quality. The most common gold items that can be used as collateral are different pieces of jewellery, coins, etc.; however, this will differ depending on the lender. Lenders also evaluate the gold that has been pledged, either internally or through external evaluators, and base the canara bank gold loan amount on the purity and appraised value of the gold that has been pledged.