Gold Loans: Amendments in Mode of Repayment

After taking out a gold loan, many individuals tend to wait until just before the maturity date to renew or repay the loan. Financial institutions in this sector are now working to change this trend. Instead of the previous loan structures, they plan to introduce and promote a monthly repayment option through Equated Monthly Installments (EMI). The Reserve Bank has raised concerns about the significant increase in gold mortgage lending and the failure of some financial institutions to adhere to regulations. In light of this, financial institutions are moving towards offering only EMI facilities. Therefore, before deciding to pledge your gold with gold loan companies in India, it is important to understand the new amendments to gold loan schemes.

Gold Loan EMI: New Rules

The introduction of the EMI facility means that gold loans will now operate like term loans, requiring monthly installments for both principal and interest. While this option is available, many customers still prefer to wait until the last minute to renew their loans and reclaim their gold, with about 75 percent following this approach at commercial banks.

Previously, borrowers could pay only interest initially or use a lump-sum payment option at the end. The new plan eliminates these alternatives and mandates repayment through EMIs only.

The Concerns of the Reserve Bank

The Reserve Bank has expressed concerns that some financial institutions are not properly following regulations related to gold loans, including KYC rules, cash limits, and loan-to-value (LTV) ratios. Reports indicate that loans have been issued to multiple individuals using the same PAN card.?

Lapses include verifying gold purity without the customer present, failing to meet the 75% LTV limit, violating loan agreements, and misusing loan funds for unintended purposes.

LTV Value: Maximum at 75%

The new gold loan amendment confirms that a maximum of Rs 20,000 can only be given in cash to the customer in gold mortgage loans. If the amount is more than that, it should be transferred digitally. LTV (Loan-to-Value) is the limit of the loan amount. The maximum loan amount is 75% of the total value of the gold secured.

Unlike selling gold, where you receive the full worth of your gold, gold loan solutions in India will offer you a maximum of 75% of the total value of gold, to which you’ll have to repay monthly EMI.

EMI and Gold Loan

When the gold loan repayment is limited to EMI, there will be a fixed repayment period. It may grant you at least 3 years. During that period the fixed amount must be repaid every month. Apart from taking gold as collateral, financial institutions may also check the repayment capacity of the customer while granting loans. That means getting a gold loan may no longer be easy as there is gold as collateral.

Many people turn to gold loans during financial crises, but recent regulations suggest that these loans are becoming more accessible only to those who are financially stable. Hence, if financial support is what you need, why do you need to be scrutinized by a financial institution that takes over the possession of your gold by offering you just 75% of its value? Instead, it is better to sell your gold, where the gold-buying company will empathize with you rather than question your financial stability.

Inflexible Utilisation of Funds

A critical flaw in gold loan solutions is the use of funds. While many individuals secure these loans for agricultural purposes at low interest rates, the Reserve Bank has rightly called out certain financial institutions for neglecting to verify the intended use of the funds. These institutions assume that assessing repayment capacity and implementing an EMI system is sufficient to ensure compliance with the loan agreement.?

Thus, with the amount from gold loans, you are not flexible to utilize the funds according to your needs. Although you need to repay the amount with interest, in actuality, you have no full possession even of the funds received. On the other hand, if you decide to sell your gold, you’ll receive an instant cash-for-gold payment with full possession of your funds. You’ll have the flexibility to decide what to do with the funds.

Sell Gold in Chandigarh

The recent amendments to gold loan regulations by the RBI are likely to make it harder for financially insecure individuals to secure and repay loans. Instead of turning to gold loans in India, take control of your finances by selling your gold for cash in Chandigarh. HNS Gold provides a seamless solution, as they do not impose requirements for a stable financial condition to sell your gold. If you're seeking trustworthy gold buyers in Chandigarh, look no further—HNS Gold is the premier choice.

Gold Loan Settlement Scheme

If you’ve pledged your gold to a loan company and have concerns about your decision, we’re here to help. HNS Gold offers a constructive solution through our gold loan settlement scheme. Our experienced team will assess your loans and facilitate the release of your gold by providing the necessary payment. Afterward, we’ll buy your gold at the current market rate, ensuring you receive its full value. Take this opportunity to regain control of your finances and turn a challenging situation into a positive outcome! You can gain a happy living with this scheme. Hurry up before gold loans ruin your sleep forever.