Over the past few years, the gold loan has become massively popular, with many applying for it in times of financial exigency. This considerable growth is fueled by the COVID pandemic. The low rate of interest environment is substantially the reason for its widespread popularity amongst Indians. Unlike unsecured loans, like personal loans, the rate of interest charged by the gold loan is way lower. For instance, suppose you compare between HDFC personal loan and an HDFC bank gold loan; you will see that the HDFC bank gold loan interest rate will begin from 7.60 per cent p.a. while for a personal loan, the interest rate ranges anywhere between 11 per cent p.a. and 21 per cent p.a. Nonetheless, you as an applicant must consider certain parameters while buying gold jewellery to avail a gold loan with zero hassle.
What are a few of the mistakes you must avoid before buying gold?
Listed below are the serious mistakes you must avoid before buying gold jewellery –
∙ Not authenticating the jewellery’s weight
∙ Not checking the gold’s purity
∙ Buying from any random jewellery store
∙ Purchasing at a higher price
∙ Not checking if the jeweller provides buyback
∙ Failing to consider the BIS hallmark
Here’s a discussion in detail
When buying gold ornaments, you must factor in various parameters to determine their prices. Moreover, you must confirm that the bought gold is of standard quality with requisite markings confirming the same. Keeping such things in mind will assist you in obtaining higher loan proceeds when pledging your gold. Apart from this, it will even assist you the fetch a higher resale figure in the case of any cash crunch.
A few common mistakes you must avoid while buying gold are –
∙ Not authenticating the jewellery’s weight
Gold jewellery is sold by weight in India. If precious stones and gems are embedded, they further add to their weight. When buying such jewellery, you, as a customer, tend to miss out on estimating the weight separately. And you end up paying more than the actual, as most jewellers weigh the piece in its entirety.
∙ Not reviewing its purity
91.6 per cent of gold or 22 Karat is the purity rating of gold jewellery. 24 Karat is the purity rating for pure gold of 99.9 per cent. However, this is not suitable for the manufacturing of jewellery. As every gold karat is equal to 4.2 per cent pure gold, 14-karat and 18-karat gold just contain 58.33 per cent and 75 per cent pure gold, respectively.
As 24 karats cannot be used for the manufacturing of jewellery, jewellers use 22-karat, 18-karat or 14-karat gold. Gold jewellery bought from any jeweller who is credible will have the 22K marking, fineness number and BIS marking engraved on it. Such markings help assure the best value per gram on a jewellery loan. Opting for a gold loan with 22-karat gold is extremely simple. Hence, buying gold jewellery without checking up on its purity is a complete no. Ensure to check the gold’s purity rating and BIS hallmark when purchasing the jewellery or using it as security or collateral for getting a hassle-free gold loan. Such ratings are checked thoroughly before any lender approves the credit.
∙ Buying from any random jewellery store
Considering that there are several jewellery stores, selecting the correct one may be tricky for you. Reputed jewellers put their hallmark or gold ornament abbreviation for fast identification. Moreover, renowned jewellers will not jeopardise or hamper their reputation by passing off or selling impure gold as pure. It is often the situation for small sellers. If you are one of those planning to buy gold jewellery, you must look out for the jeweller’s reputation for utmost safety.
Also Read: HDFC Bank Gold Loan Interest Rate
Purchasing at higher costs
The next must-check parameter is the manufacturing process of the gold to be bought. It is common in the present day age to witness jewellers making machine-made ornament. Making charges on the jewellery are comparatively lower as compared to the man-made ones. When it comes to making charges, it is worth stating that these charges reflect current gold rates. Thus, you must insist on the fixed making charges so as to ensure cheaper buys.
Not looking for the BIS hallmark.
BIS is an authorised GOI agency for the quality testing of gold. If you are one of those collateralising your gold jewellery, then the BIS hallmark will assist you in fetching a higher value on every gram of gold.
What are the important parameters that impact your application for a gold loan?
The rate of the gold loan per gram is based on the gold’s quality and purity. As a gold loan is secured in nature, the lender auctions it in case you fail to repay the loan proceeds. So, the gold loan per gram rate is usually higher when the gold pledged is of the BIS hallmark and standard purity.
Similarly, if gold jewellery lacks purity and quality, gold loan every gram rate moves down considerably. The gold loan rate for every gram is proportional directly to the karat rating and gold quality to be pledged. Many a time, a trustworthy financer does not approve the loan against gold that lack quality and purity.
Read on to know the parameters that impact the application for a gold loan
Gold purity
As mentioned already, gold purity plays an important role in deciding the gold loan interest rate. Hence, knowing the per-gram gold rate is crucial. The higher the purity level, the higher the chances of availing of a gold loan approval.
Weight of gold
As gold is sold by the jewellers by weight, the heavier the piece more costly it is. When precious stones are included in the ornament, jewellery weight increases; hence, when buying gold, make sure to weigh them well. By pledging gold jewellery of the highest purity, you can get maximum funds through a gold loan in times of exigency.
The price of gold
With the correct gold jewellery collateralised, you, as a customer, can secure a substantial gold loan promptly. Note that lenders approve a maximum of 75 per cent of the pledged gold’s value as per the Reserve Bank of India guidelines.
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