Gold loan is a popular choice amongst people as it is fast and relatively hassle free. If you are planning to go for a Gold loan, then you must know about the following:
#1 Compound Interest
You are liable to pay interest on your Gold loan like any other loan. Your interest is calculated on a monthly interval on your overall outstanding till that date. This means on your original loan amount plus the accrued interest. Yes, interest is charged on accrued interest as well. This is called Compound interest. Compounding of interest as a method of interest calculation is an industry standard, unless and otherwise stated. Most customers assume that they will pay only Simple interest which is not the case. So be informed!
#2 Interest Rate Terms And Conditions
To avoid unpleasant surprises, individuals should have clarity on the terms and conditions of a gold loan before applying for a loan from a lender. Gold loan providers may update your interest rates to the next slab, for example, when repayment schedules are missed.
#3 Fixed Interest Rates
When interest rates remain fixed every month, it is knowns as fixed interest rate. Rupeek offers fixed interest rates on all its schemes. This should not be confused with paying fixed interest amount every month, as the interest is charged on the overall outstanding amount which includes principal and accumulated interest. Fixed interest rates may appear optically high at times but majority of times customers end up saving more by paying lesser overall interest.
Banks charge EMI i.e. Equated monthly interest. Thus every month you pay some interest along with a part of your principal amount. Most banks levy penalty charges when EMIs are skipped. Thus if you have a Gold loan from a bank, skipping EMI won’t be good idea. Rupeek offer flexible interest payment without any penalty. You can chose to pay only once in the tenure of the loan and still be relaxed.
#5 Penal Interest
When you have not closed your loan even after your tenure is over, you will be charged penal interest. There is no fixed formula to ascertain this as every company charges it differently. Penal interest may be in addition to penal charges as well.