Golden Rules: How to Plan for Repaying Your Gold Loan

Gold loans are considered the best choice for people in need of immediate cash, and it can be a rather smart move. However, like any loan, they must be repaid within a specified period and promptly. Planning for gold loan repayment is essential to avoid penalties, defaults, and the loss of your gold asset.

Some of the best gold loan providers, be it a bank or NBFC, offers a convenient loan repayment schedule to the borrower. It is very important to make payments on time without a single default. This is because delays inrepayment can negatively impact your credit score. Here are some tips on how to plan for repaying a gold loan:

Understand the Loan Terms

Before availing of a gold loan, it is important to understand the loan terms, including the interest rate, tenure, and repayment schedule. It helps you know how much monthly budget you need to keep aside to never miss your payments and also allows you to understand the payment breakdown (principal amount, interest, and other platform charges).

Create a Budget

Budgeting is a crucial aspect of loan repayment. Creating a budget will help you assess your income and expenses. Make sure to include the gold loan repayment amount in your budget every month and stick to it to avoid defaulting.

Explore Repayment Options

Most lenders offer various repayment options, such as monthly payment, bullet repayment, or part-payment options. Choose an option that suits your financial condition and repayment capacity. Usually, most people stick to monthly repayment as it is convenient and does not put extra strain on your budget.

Use Windfalls and Savings to Repay

Use any unexpected income, such as bonuses, tax refunds, or inheritances, to repay your gold loan. You can also use your savings to pay off the loan before its tenure ends. This will help you reduce your outstanding loan amount and save on interest. However, you should always ask the lender for any pre-closure charges to avoid losing extra money.

Avoid Taking Multiple Loans

Never put an extra burden on yourself by taking multiple loans at a time. It becomes difficult to manage and repay these loans on time.

A proper plan for gold loan repayment will help you manage your loan. It will give you better control over your budget, and you will know the financial flexibility that you can afford.