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Things Not To Do When Buying Gold: Making Your Future Gold Loan Needs Easy

By Chanel Rick - Aug 9,2022
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“Did you hear? Gold prices are down; shall we invest in some?” 

Nothing delights the senses of traditional investors like headlines that scream, “the gold market has crashed!”. Sudden spirals in the Indian commodities market send people rushing to their closest gold shops. They fight off the crowds, taking their families to purchase gold jewellery, coins, or biscuits. 

After all, the market is down, and so are gold prices. There couldn’t be a better time to invest in this limited but precious metal! But is making a beeline to the nearest store a wise choice? Will purchasing random bits of gold as earrings or bracelets pay off in the long run? The answer is simple – it depends on your long-term plans. 

The next time an urge to invest in gold arises, ask yourself the following questions. 

“What’s the purpose of this gold?” 

“Do I want a safe and liquid investment?” 

“Will its use be limited to an accessory?” 

“Can I get a loan against it in the future?” 

Pay close attention to these questions; they will help narrow down the nature of the purchase. Experts recommend investors focus on gold assets that qualify for loans. It’s in preference over assets that require their sale for access to liquidity. The latter could extinguish your gold reserve, reducing the investment portfolio’s value. A gold loan allows you to secure the necessary funds without selling the assets! 

Things to Avoid While Purchasing Gold 

While shopping for new gold investments, thoroughly analyse the quality of the metal before you. Certain discrepancies in purity and authenticity could lower the chances of availing lucrative gold loans. Use the following guidelines to avoid purchasing gold assets that are ineligible for loans. 

1. BIS Hallmark 

This optional quality assurance method is the only government-authorised agency for testing and marking the quality of the seal. It can single-handedly get investors more money per gram, unlike gold ornaments without the BIS hallmark. Leading gold jewellers in India adhere to the standards set by BIS, using it as a marketing tool. 

2. Karatage 

While 22 karat is the standard purity rating of gold ornaments, 24 karats are considered a purer quality. Though, the latter can’t be used to manufacture jewellery. Gold ornaments purchased from reputable sellers will have a 22 K marking, fineness number, and BIS marking. These added quality checks will ensure you receive the best value per gram on a gold loan. 

Tip: Most banks and NBFCs don’t accept 18 karat gold. If they do, there’s a high chance that it will be a longer-than-usual process with potentially higher interest rates. 

3. Gold Jeweller’s Ratings 

Well-reputed jewellers will usually add their hallmarking or other logos on the ornaments made and sold. It helps lenders identify the jeweller to verify the quality of the gold. These markings will make it easier for borrowers to get a gold loan. Since the gold loan depends on the quality of the assets pledged, these additional markings will assure lenders of its purity. 

By following these simple guidelines, you can ensure that this investment fetches a reasonable gold loan in the future. These tips can help you align all gold-based investments with future financial obligations. However, certain aspects of gold loans still require special care to avoid rejection, high-interest rates, or low loan amounts. 

Here are a few mistakes to avoid while applying for a gold loan. 

●    Lender’s Credibility: Verify through reviews and feedback about the lender’s credibility to ensure the pledged gold remains in safe custody  

●    High LTV Ratio: Avoid accepting the offers of lenders that guarantee high loan amounts since the RBI only sanctions up to 75% of the LTV ratio

●    Settling too Quickly: Explore the market to find gold loans with competitive interest rates

●    Studded Gold Ornaments: The gold loan amount sanctioned will not be affected by the value of the precious gemstones fitted on the ornaments pledged 

●    Repayment Structure: The repayment plan for gold loans differ among lenders 

So, from here on out, you can watch out for common mistakes investors make while purchasing gold ornaments and other yellow metal-based investments. These guidelines and tips will help you avoid encountering any hiccups while applying for a gold loan in the future.

Searching for trustworthy lenders to finance upcoming obligations? Look no further! Apply for a hassle-free and quick gold loan on Bajaj MARKETS today.

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