When a customer has gold loan, there are some factors to be considered irrespective of the scheme you selected (whether you have a bullet scheme or EMI only scheme or interest only scheme). If the gold prices drop over a period of a month, lender will ask customer to make part payment on the loan.
Basically the loan against gold is approved up to 75% value of gold price which customer pledges, which generally called as LTV (Loan to Value) and the amount is depend on the purity of gold. This LTV generally derives from a running average of gold price for a month or upto 3 months. All lenders have their calculation system and hence the LTV of all vendors differ by some amount.
In case of falling gold prices, banks & NBFCs (non-banking financial companies) drop their LTV for gold loans. The Reserve Bank of India (RBI) had mandated the ratio at maximum 75% and with steep fall or drop in gold price on a daily basis, lenders are at risk of exceeding the limit.
Banks or NBFCs fix the LTV at the beginning of month with calculated margin to avoid any such scenarios so that the LTV can stay at the same throughout the month. But any sharp drop can result financial institutes to request part payment from borrowers, which is a nominal amount and goes towards the principle. The reason is simple – the value of gold pledged will also drop and the banks have to follow RBI mandate.
Borrowers are given time to pay the difference but in some cases where borrower fails to pay, the gold is auctioned by lender after giving notice to borrower/customer.
In some cases, Banks & NBFCs also offer upto 65% or 70% of loan against the gold pledged for their customer to avoid of part payment of the loan in case of drop in gold price.
We, at Golduno will help you to get the best deals on Gold Loan via financial institutes PAN India. Our Gold Loan experts will walk you through the process and will be available to assist you during and after the process.
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