Going for a Gold Loan? Know What Factors Influence the IIFL Gold Loan Interest Rate

There are many kinds of loans available in the Indian market. One such type is a Gold loan. In this, one can pledge their gold ornaments and raise immediate capital to fund or cover any emergency or non-emergency needs. Lenders such as banks and NBFCs decide the amount of gold loan to be sanctioned to an individual based on a certain percentage of the total value of the gold ornaments in the domestic market.

Every gold loan includes an IIFL Gold Loan interest rate which the lender charges for rendering the loan services. As a borrower, you are liable to repay the principal loan amount with interest to the lender within the loan tenure.

It is a secured financing option where the lender; bank or NBFC, sanctions a loan amount to you and keeps the gold ornaments with them as collateral until the borrower has paid the whole amount along with the interest. Now that the basics of what gold loan is cleared to you, you should know are essential aspects of an IIFL Gold Loan and one such important aspect is the gold loan interest rate. 

What Factors Affect Gold Loan Interest Rates?

As mentioned above, the gold loan being secure in nature has the advantage of allowing anybody to avail gold loan at a lower IIFL Gold Loan interest rate. Gold loans from various lenders charge different interest rates and there are various reasons behind this. Let’s understand what are the top factors that impact your IIFL Gold Loan interest rate:

Loan amount: The market value of gold makes it simple for you to secure a greater loan. According to current RBI restrictions, most lenders will lend up to 75% of the entire value of the gold you are pledging. The IIFL Gold Loan interest rate on your gold loan is determined by the loan amount you requested and the frequency of you paying your installments.

The market price of gold: In India, the market price of gold influences the interest rate on gold loans. When the market price of gold is high, lenders will be ready to give lower interest rates on gold loans since the value of the collateral is higher. This is because, in the event of a default, the lender is less likely to suffer a loss because they can sell the gold that was promised to recover the outstanding loan amount. When the market price of gold is low, lenders may impose higher interest rates to compensate for the greater risk of default.

Repayment Period: The frequency of your loan’s interest payments also influences the interest rate. If you choose a repayment option with a larger frequency of instalment payments, you will pay a lesser IIFL Gold Loan interest rate on a gold loan, and vice versa.

Monthly earnings: Despite the fact that IIFL Gold Loan are simple to obtain and do not require much documentation, certain lenders may request proof of monthly income throughout the application process. In contrast to unsecured loans, gold loans provide simple and flexible requirements for borrowers. When a borrower asks for a gold loan, the lender specifies very few eligibility criteria. A steady source of income lowers the gold loan rate that the lender applies to the loan amount you intend to borrow. This is due to the lender’s confidence in your capacity to repay the loan. Borrowers with lower incomes, on the other hand, may face higher interest rates to compensate. 

Supply and Demand: When the demand for gold exceeds the supply, the price of gold rises. On the other side, if the supply exceeds the demand, the price of gold falls. Lenders adjust IIFL Gold Loan interest rate in response to changes in gold prices. The value of gold, like any other item sold in the market, is determined by supply and demand. In contrast to consumable products, however, only gold mined to date is offered on the market. Because the amount of gold extracted each year in the world is not particularly large, this quantity is limited.

As a result, if demand rises, supply does not rise in tandem, causing the price of gold to fluctuate. In this case, finding a lender who offers cheap interest rates on gold loans may be challenging.

Financial Situation of the Country: Domestic gold prices are inversely linked to gold loan IIFL Gold Loan interest rate. The greater the gold price, the lower the interest rate, because your pledged gold is worth more. As a result, it is critical to regularly monitor gold prices in order to obtain a low-interest gold loan. The economic situation in India affects the price of domestic gold and, as a result, the interest rates on IIFL Gold Loan. When the economy is in a slump, investors tend to buy more gold, either in person or online. The main reason is to combat inflation and its effects on other asset classes, such as stocks. Because gold is in more demand, borrowers may be able to obtain the lowest gold loan interest rate.

Repo rate: Gold loan rates fluctuate in response to changes in the Reserve Bank of India’s (RBI) repo rate — the rate at which it lends money to commercial banks. Any change in the repo rate would affect the bank’s MCLR, resulting in a change in the customer’s interest rate. 

LTV (loan to value) ratio: The LTV ratio has an effect on interest rates as well. It is directly proportional to IIFL Gold Loan interest rates. The higher the LTV ratio, the higher the interest rate, because it implies a higher level of risk.

So we are saying, 

If you have a consistent source of income, some lenders may choose to charge a reduced IIFL Gold Loan interest rate on the loan amount you want to borrow. This is due to the lender’s faith in your capacity to repay the loan. 

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