Gold Loan is a significant phenomenon. With a widespread demand for loans to purchase gold, the number of applications in India has seen a quantum leap in recent times. It is primarily due to the COVID-19 pandemic that has seen an increase in demand for such loans.
Gold loan is a type of unsecured consumer credit that allows you to borrow against your gold ornaments. This can be done by buying gold and selling it, or by purchasing gold jewelry at a price lower than its market value. This option is available to those who don’t have any other stable source of income, who want to reduce their reliance on income earned from working and take control over their finances.
Some Mistakes to Avoid before Purchasing Gold
The following are the mistakes to avoid before purchasing gold:
- Not verifying the ornament’s weight
- Not checking Gold purity
- Purchasing from a any random jewellery store
- Buying at higher prices
- Not checking if the jeweller offers buyback
- Not looking for BIS hallmark
Gold is a precious metal that has been used by humans for thousands of years. Its nature makes it one of the most desirable and expensive non-permanent materials in the world. Gold can be purchased either in small pieces or in larger bars, which are called gold bullion. Gold can be processed into various shapes such as chains, necklaces, bracelets and coins.
As the gold market is volatile, it is always important to take protection measures in place to protect the wealth. This can be done by surrendering your gold items to a reputable gold seller and selling them at a premium over spot price. This will increase the value of that particular piece of gold but also ensures that all documents are submitted as per regulations and procedures, which can lead to more favourable deal terms for you.
Some common mistakes one should avoid while purchasing gold in details are as follows:
1. Not verifying the ornament’s weight
Gold jewellery in India is sold by weight. This means that if precious gems are embedded inside the piece, they add to the weight. When purchasing such pieces, customers often forget to estimate separately. And, one ends up paying more than the actual since most jewellers weigh a piece in entirety.
2. Not checking its purity
When you buy gold jewellery, the percentage of pure gold included in the item is of great importance. The lower the purity rating, the more it will affect the price of your jewellery. Gold karat has different base metals that include silver and copper.
Gold is a precious metal that has been used in jewellery since ancient times. Gold dust is sometimes mixed with other alloys to increase weight, enhance shine and strengthen layers of metal. Since gold cannot be made in large quantities, it is used to make jewellery because it can achieve the right level of density. However, gold is also used in electronics as well: microscopic chips are sealed in glass tubing, coated with a thin layer of gold and then embedded into silicon substrate to protect them from damage while they work efficiently.
3. Purchasing from a random jewellery store
When it comes to buying jewellery, purchasers are generally concerned about the purity of the metal. However, as with other goods, consumers should not just focus on the gold itself but also on how the jewellery store conducts business. Reputable gold stores will put their mark and logo on the ornament to help identify it.
4. Buying at higher prices
The manufacturing method is a consideration to weigh when purchasing gold ornaments. The cheaper an ornament is, the greater chance of it being made with a lesser quality. Gold is always precious and shouldn’t be cheap and second-rate material rolled into one item. If a customer understands the production process behind the product being sold, they have more control over their purchase.
5. Not checking if the jeweller offers buyback
It’s still important to make sure that the jeweller offers buyback facilities. Despite the BIS marking, which makes it easier for you to sell your gold jewellery, when you choose another lender for selling your old pieces, there are more deductions always. For example, you could exchange your old ones with new ones from the same company. In this case the deductions are marginal and thus enables you to get maximum value for your exchanged items.
Gold isn’t just something that you buy at a store to wear as a piece of jewelry. It can be one of the most valuable assets you can own. This precious metal is extremely durable, making it a great option for storing wealth and buying an imminent amount of power. The price may fluctuate throughout the year, so knowing when is the right time to sell gold can help you maximize your profits.
6. Not looking for BIS hallmark
With BIS Hallmarking, you are able to get a gold loan at an affordable rate. The testing and quality sealing (BIS Hallmark) is the only authorized agency of the GOI. This program will fetch a higher value per gram on a gold loan. Besides, opting for gold ornament with the BIS hallmark will enable getting a lower gold loan interest rate easily.
What Are the Factors That Affect Your Gold Loan Application?
The gold loan rate per gram is the cost of borrowing gold ornaments against a secured credit facility. Since gold loan is a secured credit facility, a lender auctions the gold in case a borrower fails to repay the loan amount. So, the gold loan rate per gram is higher when the gold pledged is of standard purity and BIS hallmarked.
Similarly, if the loan amount is too small or the gold ornament lacks standard purity and quality, then the gold loan per gram rate goes down significantly. Gold loan rate per gram is directly proportional to the karat rating and quality of the gold to be pledged. Many a time, trustworthy financers do not approve loans against gold ornaments that lack purity.