With gold loans, getting quick funds is possible, alongside benefits such as low rates of interest and flexible repayment options. All of these make gold loans a popular choice, but you may not always get the best deals. This is when facilities like the gold loan balance transfer come into play.
It is a facility designed to help you optimize your outgo. The facility allows you to switch lenders and take advantage of better terms in the market. Doing so has several benefits, one of which includes lower EMIs. Thankfully, tools like the online gold loan calculator make it much easier to plan such endeavors.
To know more about the gold loan balance transfer facility and how it can help lower your EMIs, read on.
Key Pointers About the Gold Loan Balance Transfer
As mentioned, the balance transfer facility is one that allows you to switch lenders, during your tenure. You can swap from your existing lender to a new one to avail more favorable terms. In theory, this facility is a very helpful one but requires planning to execute for maximum value.
This is because there are many factors that affect the value you get from opting for the gold loan balance transfer. Some of these are:
- The current valuation of gold
- The fees and costs applicable to opt for the facility
- The timing of the switch
- The lender-specific prepayment terms
Understanding these factors is important, as it helps you lower your EMIs when opting for a gold loan balance transfer. For a better idea of how to go about this, read on.
How to Lower Your Gold Loan EMIs with a Balance Transfer
The key features of the gold loan balance transfer help you lower your outgo. However, this result is only achieved with proper planning. Here, the online gold loan calculator helps, but you need to know a few other strategies as well.
1. Pick a Lender Offering a Low-Interest Rate
The rates on a gold loan change frequently, making it crucial for you to pick the right lender. This means finding one that offers the lowest rate for your profile, and ensuring that the lender offers the facility.
Here, getting just a 0.5% lower rate may not translate to noticeable savings, and may not be worth the effort. The best way to know how much you stand to save is to use an online gold loan calculator and note the difference. Check the new EMIs payable and the total interest outgo to estimate your savings.
2. Ensure That You Pay Minimal Fees
Opting for the gold loan balance transfer facility will have a few costs involved. These will be levied by both your existing lender and the new lender you choose. Some of the common charges will include prepayment fees, processing fees, and other administrative charges.
Factor all these costs in when making the switch, and do a thorough cost-benefit analysis. This is the only way to know if the swap is worth it, and if you actually stand to save money down the line. An easy way to ensure this is to negotiate favorable terms with the new lender.
3. Check the Rate Per Gram
The rate per gram is the rate of gold per gram or 1 gram. This rate of gold is one of the factors that affect the rate of interest that you have to pay on your gold loan. The rate per gram of gold fluctuates daily. As such, timing the switch is key to extracting maximum value.
Some of the factors that affect the per-gram rate of gold are:
- Supply and demand
- Increase in Inflation
- Gold reserves of the government
- Market trends
- Import and export
- Movement in GST and other taxes
Gold per gram rate also affects the loan-to-value (LTV) ratio, which is the loan amount quoted by the lender based on the value of the gold offered as collateral. So, when swapping lenders, check these terms, and if the rate offered for your gold is favorable enough to get a lower rate.
4. Tweak the Repayment Plan
Transferring your gold loan balance to a gold loan lender that provides better services is a wise financial decision to make. With the new lender, you may get better repayment terms, which include greater flexibility on your gold loan.
In some cases, the new lender may offer an extended repayment time period or a flexible tenure on your gold loan. This allows you to take advantage of a customized repayment plan, one wherein you can lower your EMI outgo.
Opting to tweak the repayment plan is one of the easiest ways to lower your gold loan EMI amount. Do keep in mind that going this route will usually require you to opt for a longer tenure, and this can increase your total interest outgo.
5. Opt for the Balance Transfer Early
Opting for the gold loan balance transfer at the right time is crucial for two reasons. The first reason is to take advantage of low-interest rates, while they last. Delays in transferring or loan processing can cause you to miss out on favorable rates, which can affect your savings.
The second reason is that the interest component of your EMIs is higher during the first portion of your tenure. As such, the savings you enjoy with a lower interest rate are lesser if you opt to swap lenders later in your tenure.
Ideally, you should avail of the gold loan balance transfer as early as possible, as this helps maximize your savings. Do note that some lenders may have prepayment or foreclosure terms, which prohibit you from opting for the balance transfer facility.
In general, the gold loan balance transfer facility is a great option through which you can reduce the overall expense of your gold loan. It requires a calculated approach, but it is worth it. Here, doing your research is a must, and you should ensure the savings outweigh the costs.