By providing an easy way out, without loss and liquidation of precious possessions, in times of financial need, Gold Loans are always there to help. Amidst the numerous assets found in most households, one that stands to be of immense value has to be gold. A Gold Loan will provide you with a quick and convenient way of getting funds by pledging your gold jewellery or coins as collateral.

You must understand that before you opt for this step, it's important to note how interest rates of Gold Loans play an important role in deciding if this financial product is affordable and suitable for you.

What is a Gold Loan?

Gold loans are Secured Loans wherein you pledge your gold as security to raise money. Generally, the Loan amount disbursed in such Loans is a percentage of the market value of your gold now. The higher the value of your gold, the larger is the Loan that you can obtain. Many people prefer Gold Loans as they can be advanced at very short notice, sometimes within a few hours from the application date, making it useful for meeting any urgent need of your pocket.

The importance of Gold Loan interest rates

Gold loan interest rates usually appeal by the rate being provided by the lender. Often, Gold Loans have lesser interest rates than Personal Loans since they fall in the category of Secured Loans. The interest on Gold Loan differs depending on Loan-to-value, tenure, and internal policies are some of the major causes of these variations.

With a higher percentage purity, the precious gold submitted by their clients is more intrinsically valuable, attracting the lower interest charged by lenders. Shorter tenures will normally attract lesser interest charges than longer tenures.

Fixed vs. Floating interest rates

Depending on the institution offering the Gold Loan, the interest rates may be either fixed or floating. A fixed rate would ensure that the interest of the Loan remains unchanged in the overall Loan tenure. A fixed rate is predictable and represents certainty on amounts to repay. For floating rates, however, it may change according to the market rates.

This can be good when the market turns in your favour, and you save more because the floating rate decreases. However, the reverse can also happen, and you might pay more if the floating rate increases.

Conclusion

A Gold Loan is a great financial tool because it allows you to access the value of your assets without having to sell them. Understanding and choosing the best Gold Loan interest rates will ensure that you utilise your gold maximally while simultaneously keeping the financial cost manageable.