Occasionally, we find ourselves in a position where we have taken a loan to fulfill an urgent need but find it difficult to repay. When applying for a gold loan, you may have checked the interest rates but perhaps missed out on checking other terms like repayment options.
One of the viable ways is to transfer the outstanding balance. Choose a lender that offers better loan terms and interest rates to help ease your burden. Let us understand what a gold loan balance transfer is in further detail and the advantages that come with opting for this facility.
What is a Gold Loan Balance Transfer?
A balance transfer is a facility which enables you to transfer your existing gold loan from one lender to another. There are various reasons why individuals opt for this facility, some of them being the availability of lower interest rates and favourable repayment options.
A lot of factors are at play when it comes to your gold loan, like the Loan-to-Value (LTV) ratio. You can refinance your gold loan to get better terms and services instead. If you think your existing loan is burdening your finances, you can opt for this facility and lower your EMIs and other expenses.
Why Opt For a Gold Loan Balance Transfer?
Here are some important features and benefits a gold loan balance transfer has to offer.
Improved Interest Rates
One of the most important factors that determine your EMI payouts is the interest rate. You can lower this rate with the help of a gold loan balance transfer. With this option, you can opt for a lender who offers the same loan for a lower interest rate, reducing the overall expense of your loan and the amount you are liable to pay as monthly instalments.
Some lenders may provide you with the option to manage your repayment schedule. You can choose to pay interest during the initial part of the tenure and the principal amount later. This helps reduce your EMIs for a specific period of time and lower the strain on your finances. If your present lender does not provide this facility, you can transfer your loan balance to another lender.
Favourable Loan Terms
Do you think that the foreclosure charges of your gold loan are too much or that other terms of your loan seem unfavourable? You can opt to transfer your gold loan balance to a lender, who provides you with better terms and conditions. This could be in the form of extended tenures, lower prepayment fees, part-release facilities, and so on.
A gold loan balance transfer can help you get more from your existing gold loan. For example, assume you took a gold loan from a banking institution. The LTV offered was 65% for your gold worth ₹1 Lakh. This means you can borrow up to ₹65,000 by mortgaging your precious metal. Now, you transfer your loan to an NBFC and suppose you get a Rupeek gold loan at an LTV of 70%. In this case, you can borrow an additional ₹5,000 with your existing loan.
Some lenders can offer your gold better security and secure transport. If you are concerned regarding the security of your gold with your current lender, you can transfer your loan. Make sure that the lender you choose provides complimentary insurance coverage. With this, you can get up to 100% compensation in case your gold is stolen or damaged, when in possession of the lender.
Charges Associated with Your Gold Loan Balance Transfer
While a gold loan balance transfer can be beneficial, it is important to keep in mind the charges associated with it. Here are some charges you should consider before applying for the gold loan balance transfer facility.
Prior to transferring the balance to a new lender, you will be required to close your existing loan account. To do so, the original lender will ask you to pay a fee, as you are closing the loan account prior to the end of the decided tenure. This charge is usually about up to 1% of the outstanding balance being transferred.
When changing your lender, you are required to open a new loan account with the new lender. This means, your documents and application are processed once again for the same loan. Therefore, you are required to pay a processing fee when transferring the gold loan balance. This charge usually amounts to about 1%.
Alongside the processing fee, there is another charge you are required to pay at the time of applying for a loan. This amount is generally non-refundable and can cost anywhere between ₹2,500 to ₹6,500.
An inspection fee is a charge levied during the evaluation of your gold. You will be required to pay this fee to the new lender, as they will check the purity and value of your gold once again during the transfer. This charge varies from one lender to another.
If your gold loan repayment feels like a burden to you, consider transferring your gold loan balance. Make sure to keep the associated charges in mind when doing so and compare the various offers before selecting your new lender. Calculate the aggregate expense by taking into account the revised interest rate and loan terms before making a decision. Well, what are you waiting for? Get started now!