Gold loan (also called loan against gold) is a secured loan taken by the borrower from a lender by pledging their gold articles (within a range of 18-24 carats) as collateral.
The loan amount provided is a certain percentage of the gold, typically upto 80%, based on the current market value and quality of gold.
When a customer pledges gold (including jewelry, ornaments and bank-issued coins) as collateral for taking a loan, it is known as a gold loan.
The bank/lender uses the gold as security against potential payment default by the customer. The loan amount sanctioned is a certain percentage of the value of the gold that has been pledged.
Gold loan are short-term loans and the repayment period can range from one month to a few years.
if you are in need of money for immediate expenses and expect to be able to pay it back in the short term, then this type of loan might be a good option.
Emotional issue: Gold as an asset has emotional value in India since it is largely in the form of family jewelry.
Providing gold as a collateral means that you run the risk of losing your family jewelry in case you are unable to repay the loan.
This can cause undue mental and emotional pressure not just on the borrower but the entire family. So think carefully if you will be able to pay back the loan in full before you apply.
It is good to have a proven track record of making loan repayments so that you are confident about your ability to recover your gold.
Quality of lender:There are several NBFCs in the country who offer attractive terms for these loans.
However, some of them could be poorly run and could possibly shut down without notice leaving you at a loss.
It is very important to study the various lenders and choose one that has a good reputation. In addition to these NBFCs, several nationalized and private banks offer gold loans.
Quality of gold: Usually, only gold of 18K value and above is accepted by lenders. You also need to be above 21 years of age to apply for this type of loan.
If you think you a gold loan is a good option for you but are unsure who to approach, Apnarupee.com can put you in touch with reputable lenders who suit your individual requirements
ID Proof such as Driving License / PAN Card / Form 60/61 / Passport Copy / Voter ID Card / Aadhaar Card / Ration Card. Any one document needs to be submitted.
Address Proof such as Driving License / Voter ID Card / Ration Card / Aadhaar Card / Passport Copy / registered lease agreement with not older than 3 months utility bills in the name of landlord (any one).
Proof of land holding in case of agriculture loan of more than Rs. 1 lakh.
Ans. Gold loan is similar to personal loan in meeting your immediate financial requirements, be it an international education, marriage expenses, covering medical emergencies or any other personal use.
Quick Disbursal- Minimum documentation leads to faster processing of gold loan due to its secured nature.
Flexibility of Use- Since there is no monitoring of the end use, it gives you the flexibility to use the loan for any type of expense.
Secured Loan Type: You are not required to submit any other security/collateral to the lender other than the pledged gold ornaments.
Lower Interest Rate: Interest rates on gold loans are on the lower side when compared to personal loan, since gold serves as collateral.
Liquidate your idle asset: An idle asset, gold is seldom used for generating money. Hence gold loan is the perfect solution to raise capital and use the fund when you require money to meet your financial needs. It is also more secure in the confines of a bank’s or a financial institution’s locker than your home
Ans. nterest rates for gold loan varies from lender to lender and ranges from 9.24% to 17%.A nominal processing fee ranging from 1-3% of the loan amount is also charged by some lenders.It is always advisable to check and compare interest rate, processing fee, late payment charges and pre-payment charges with the lender before going for the loan.
Ans. Yes, you can always foreclose the loan at any point of time.
Most lenders do not levy foreclosure charges for gold loans, but a few lenders charge between 2-4% of the outstanding principal amount.
You can always get in touch with the lender to know the procedure they follow to foreclose.
Ans.Gold loans are short-term loans and have a flexible tenure ranging from a minimum of 1 month to 5 years or more depending on the lender.
Ans. Since gold loans are secured against your gold, you should be careful about loan repayment and should take loan amount that you actually need and can repay comfortably.
Defaulting on loan can adversely affect your credit score and report including cancellation of any future loan application.
Ans. Action taken on customers who default varies from lender to lender.
Some lenders charge interest for the time overdue, which is usually higher than the rate a customer pays for the loan.
Further default on loan payment will result in a notice sent to you, informing you of the time within which you will have to clear your obligations.
Non-payment of loan by the final notice date can also lead to lenders auctioning your gold articles to recover their outstanding loan amount.