A person in need of financial assistance can avail of a gold loan or loan against gold from banks and non-banking financial institutions by pledging their gold ornaments as collateral/security. A gold loan is not restricted to be used for a particular purpose. It can be used to cater to various financial needs such as a child’s higher education or marriage, medical treatment, expansion of business, buying a house, etc. Also , while comparing the gold loan rate India, we can figure out that the rate is nominal and it is easy for people to fetch a loan against gold. The loan amount that can be availed by the borrower is based on the market value of the gold up to 80%.
Features of Gold Loan
Secured loan – A gold loan is a secured loan. The chances of your approval of the loan will not be affected even if you have a bad credit history.
Loan tenure – The tenure of the gold loan ranges anywhere between 3-36 months.
Repayment options – The gold loan has flexible repayment options. Lenders offer three repayment options to borrowers. These are :
- Repayment of the investment in the form of Equated Monthly Installments
- Pay the interest on the loan every month and the principal amount of the loan repaid at the end of the tenure.
- Pay the interest on the loan in advance and the principal amount of the loan repaid at the end of the tenure.
Fees – Processing fees, documentation fee, late payment charges, valuation fees might be applicable on gold loan.
Interest rate – The rate of interest varies from lender to lender. It can be anywhere between 9-20%.
Eligibility criteria to avail a gold loans
Any salaried professional, self-employed, or a homemaker can apply for a gold loan. To avail of a gold loan, you must meet specific eligibility criteria specified by the lender. The eligibility criteria for a gold loan are:
- A person should be 18 years and above to apply for a gold loan.
- An individual who is willing to pledge their gold articles as security can apply for the loan.
- Lenders require gold ornaments of 18 carats and above to pledged as security.
How does the value of gold asset affect the loan:
1. The purity of gold assets will determine the ratio of credit against the assets. For instance, credit taken against the gold of lower purity with 18 and 20 carrots will undoubtedly vary from gold ornaments with higher purity with 22 carrots.
2. The hallmark jewelry can exempt you from paying processing fees. Banks usually charge processing fees up to 2% of the loan amount taken.
Documentation
The application process of gold loan is fast and simple. You can avail of the loan on the same day if you have all the documents ready. The following documents are required to avail a gold loan:
- Identity proof ( PAN Card or Aadhaar Card )
- Duly filled in the application form
- Address proof ( Electricity bill / Passport )
- Passport-size photographs
- Signature proof
Benefits of taking a gold loan
Availing a loan against gold has many benefits. They are:
- Borrowers are not required to show credit card history or income proof for the loan to be approved. You only need to pledge your gold as security. Hence the approval process is quick and straightforward.
- Gold loans are offered at a low rate of interest. The price of interest varies from lender to lender. It can be anywhere between 9-20%.
- A gold loan can be approved in a quick time. The process of approval can also be completed in as less than 4 hours, depending on the purpose of the loan taken.
- Gold loans also provide more elevated amounts of credits against other types of securities. One can avail loan amounts up to 75 % of the gold assets.
Even if the price of the gold fluctuates, your loan or pledged gold will not get affected in any way. Once you have availed the loan, you will not be required to make up for the difference in the amount even if the gold price gets decreased, leading to higher loan value. However, if the borrower fails to repay the loan amount by the end of the loan tenure, the lender sells the gold articles to recover the outstanding debt. You should compare the benefits, features, terms and conditions, rate of interest offered by various lenders before availing a gold loan.