Gold is considered so auspicious that an entire day is dedicated to buying gold in the country every year before Diwali. There is immense demand for gold in the country. It is the primary metal used to make ornaments/gold jewellery that everyone across the country wears. In India, gold is almost owned by everyone in some form or the other. This is the reason why gold loans are so rampant in India.
What is a Gold Loan?
A gold loan is a loan where gold is used as collateral. This means that banks/NBFCs keep gold as collateral or mortgage and give funds to the borrower. The borrower is then required to repay the loan, which includes principal and interest both. This is where the gold loan EMI calculator comes into the picture. It is a loan against that gold. And do you know the best part? Gold is not a non-performing asset; therefore, banks or NBFCs do not worry about gold as collateral. They are more than happy to lend to borrowers against gold. Gold is not risky and is safe collateral as compared to other mortgages/ collaterals.
What is a Gold Loan EMI Calculator?
First, let’s understand why there is a need for an EMI. Simple. There is an online gold loan EMI calculator which helps in calculating the EMI on your gold loan. EMI is the monthly instalments you have to pay as interest on the funds you borrowed against your gold. It stands for Equated Monthly Installment and is a periodic payment made by the borrower.
To calculate the EMI on your gold loan, you need to know your repayment tenure- for how long you’re borrowing the money, the interest rate being charged on the loan and most importantly, the loan amount you wish to borrow. This is all you need to calculate the EMI on your gold loan. A gold loan EMI calculator helps you track your funds and plan your expenses accordingly.
Wouldn’t it be better to know beforehand how many expenses you have ahead of time and plan to buy/spend accordingly?
There is a mathematical formula to calculate the EMI on gold loans. It includes-
- P- Principal amount that has been borrowed
- R- Rate of Interest on the principal amount
- N- Number of months/tenure
P x R x (1+R)N / [(1+R)N-1]
Using this formula, gold loan EMI can easily be calculated.
It is important to remember that there are certain factors that affect the interest rate of gold loans, such as-
- Gold price
- The loan amount
- The term of repayment
- Valuation methods used by the lenders and the benchmark methods
- The credit score
You need to remember that before applying for a gold loan, the bank/NBFCs check the purity of your gold. If it isn’t up to market standards, then your gold loan will get rejected, and you won’t be able to avail your gold loan. You cannot fool the banks or the NBFCs on this, so make sure that the gold is of good purity.
