There is no denying the significance of gold as a financial asset. Even while sentimental reasons are the main reason people buy gold jewellery, such items can provide financial security when facing tough financial times.
A gold loan or muthoot finance gold loan is accessible to almost everyone provided you have gold with you and are willing to put it as collateral. These loans have lower gold loan interest rates than personal loans because they are secured loans. You receive your jewels back in perfect condition after repaying the loan.
How can you effectively repay your gold loan?
Repayment terms for muthoot finance gold loan are short, with a maximum of five years. These loans typically have a duration of no more than a year. The majority of lenders offer prepayment options without any fees or a required minimum lock-in time. A gold loan must be repaid in full, together with all accrued gold loan interest and any additional fees the lender may have charged. When the borrower deposits the outstanding loan principal and interest amount, the gold loan account is effectively terminated and your jewellery is returned to the borrower upon making the full and final payment. There are a number of ways you can repay your gold loan amount.
Here are a few of the most convenient options:
Pay Interest as EMI & Principal later: You are to repay the interest owed on the muthoot finance gold loan through this method of repayment in accordance with the EMI schedule provided by the lender. The principal amount can be paid off with one payment, though at the time of the loan’s maturity date. Most borrowers prefer this method of repayment as this allows them to pay only the gold loan interest during the gold loan repayment period without having to worry about the principal.
Partial Payments: You are not forced to follow the lender’s EMI schedule if you choose this method of muthoot finance gold loan repayment. You may pay the interest in installments and the principal amount as and when you could do so. This repayment method allows the borrowers to make up a repayment schedule as per their financial capabilities. In case you choose to pay the principal amount right at the start of the repayment tenure, your total interest payout reduces which helps you save a lot on the serviceable interest.
Bullet Repayment: A bullet repayment plan requires you to pay out the entire loan balance at once, including the principal and interest. Those people who don’t want to carry the burden of making loan repayments every month prefer this method. Throughout the loan term, you don’t have to worry about paying back the gold loan at all. You can pay the full amount when the loan period is finished without having to follow any EMI schedule. The loan’s interest is calculated monthly but is only due after the gold loan period is up. This method of muthoot finance gold loan repayment is known as a bullet repayment plan since you pay off the debt in one lump sum.
Regular EMI Option: A regular EMI-based repayment schedule for muthoot finance gold loan is designed with salaried individuals with a fixed monthly income in mind. Both interest and principal repayment are included in the total amount of the EMI.
Monthly Interest in Overdraft Accounts: Utilizing an overdraft account is another simple method of repaying the gold loan. Many banks, like DCB Bank and SBI (State Bank of India), give borrowers the option of getting overdrafts against their pledged gold. People can pay the monthly gold loan interest per the loan amount from these accounts, which serve as transactional accounts.
Flexible payment terms: Another flexible option is to repay interest and principal at your convenience. This method gives you the freedom to pay on an EMI schedule but in accordance with your financial capacity. Depending on your financial flow, you can pay the interest and principal in full or in part.
Pre-foreclosure payments: Very few individuals are aware that gold loans can also be repaid through foreclosure. Customers can, therefore, pay the whole amount before the maturity date regardless of the payment method they chose. Pre-foreclosure payments consequently lower the gold loan’s interest rate. As a result, the buyer will pay less overall.
However, there are situations when one is unable to make loan payments on time owing to unforeseen circumstances. Long-term loan default can have consequences that the borrower might not be aware of but you should know:
Penalties: From the loan’s due date, the company is required to impose a penal rate of gold loan interest on the loan’s principal amount. However, loans for agriculture up to a specific amount are exempt from it.
Reminder text messages/calls/letters: In the event that a payment is persistently past the due date, the business is required to contact the customer via phone, email, letter, or SMS to remind them of the outstanding loan balance. To avoid serious unforeseen circumstances, a borrower in this situation can reset their repayment plan by going to the branch office where they took the loan.
Auction: The corporation has the right to sell or otherwise dispose of the gold through a public auction at the risk and expense of the borrower if full repayment of the loan is not accomplished within the loan’s term. However, two weeks before putting the pledged gold up for auction, the lending institution will let the borrower know about the same.
How loan repayment default is avoided?
What you can do if you find yourself in a similar position is as follows:
- Inform the lender of your incapacity to make timely payments. The company reserves the right to further extend the loan’s term if doing so will provide you adequate time to pay back the remaining loan balance.
- You can make a partial principal and accumulated interest payment to lower the amount of your due loan.
- The likely repercussions of defaulting on a gold loan differ from case to situation. Even the steps used against borrowers who miss loan instalments differ from one lender to the next.
Conclusion
You must, of course, pay back your loan, whether it be a gold loan or another type of loan without any doubt. If you don’t, the lender would have to sell your priceless gold jewellery and it might even prevent you from getting future loans. Most reputable lenders provide a number of options to assist you in paying off your debt. In order to avoid a default at all costs, you can try to negotiate for more lenient terms and conditions, such as extending the tenure or lowering the EMI, even if you are having trouble repaying your loan.