As the name suggests, the gold loan allows one to take a loan by using gold as a mortgage.
Multiple banks across India are providing gold loans. Gold loans are becoming a popular choice for many because of the wide range of advantages it comes with.
However, before opting for a loan against gold, it is important to know all the important facts. Here are some factors related to gold loans.
How does Gold Loan Work?
Applying for a gold loan is an easy task. It requires a person to take the gold to his or her preferred bank. The gold will be examined and evaluated in the presence of the loan borrower.
The bank will then let the individual know the maximum amount that can be taken against the gold. After that, the borrower will have to fill up an application form. The bank will approve the loan and disburse the loan immediately.
Required Documents
Gold loans require fewer documents as compared to any other form of loan. The individual does not need to provide documents such as credit score and source of income. These documents are not needed since the bank will have the gold as a mortgage. However, the bank will ask for ID proof, address proof, and photographs.
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Interest Rates
Gold loan is secured and therefore, the interest rates are cheaper than other unsecured personal loans. The interest rates can vary from 10% to 16%.
Tenure
The gold loans are short-term and range from 3 to 12 months. Most banks offer short-termed tenure, while others prefer long-termed ones. Few lenders allow people to renew their loans and extend their tenure. The EMIs are higher in terms of gold loans due to their short tenure.
Eligibility
As stated earlier, gold loans are taken against gold and require a few documents. The financial institutions take the gold as security. Therefore, any individual with jewellery is eligible to apply for gold loans. In addition, an individual with no personal source of income, such as a housewife can also apply for gold loans.
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Repayment Method
Like any other form of a loan, one can repay gold loans in EMIs. The repayment method depends on bank policies and generally is flexible. It is an option to pay only the interest every month and pay the loaned amount at the end of the tenure.
Application Charges
There may be a few charges involved in the application process. One can be charged 1% of the loan amount as a processing fee. Valuation of the mortgaged gold can take charge as well. The bank can charge a particular amount for prepayment and late payments. In some banks, charges can be made for documentation as well. The application charges vary from one bank to another.
Benefits of Gold Loans
Gold loans come with many benefits which are mentioned below-
- It is not time-consuming
- The application and disbursement of the loan is easy
- The loan can be approved within a few hours
- It evaluates the value of gold by making the best use
- One gets the gold back immediately after completing the payment
As far as the safety of a gold loan is concerned,
The gold jewels are usually kept safe. There is complete supervision undertaken by the bank. A strong value along with a 24X7 CCTV camera. Also, in some cases, the gold ornaments can be kept insured, protecting them against theft. In case of an unexpected event, like a robbery, an amount will be given back to you in terms of the gold market’s value.
Tenure of Gold Loan:
Gold loans are considered to be short-term loans. They generally possess a flexible tenure ranging from a minimum of 1 month to 5 years.
Important Keynote:
Gold Loans are considered to be a secured form of a loan. Before going for any investment or loan option, you must make sure that you have a robust financial position. Timely repayment of loan matters. The power lies within your hand. Taking a loan and handling the entire process seriously can help to improve your credit score.
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Golden Feature About Gold Loan :
Liquidation of Assets: Gold Jewels are considered to be a valuable form of asset that can further help generate more money. Therefore, investors can raise more capital. A gold loan helps to get good cash. Thus people can meet their financial needs with the help of a gold loan.
Before keeping the gold, the lenders follow the criteria. The entire gold purity and its weight are checked. The market trend and market value are also assessed. The lender offers to give the value up to 75% of the market value. The LTV (loan-to-value ratio ) is calculated.
Let us say the total cost of gold amounts to Rs1,00,000. So, now the loan amount that will be granted would be an average of 75,000. However, some people could also get a lower amount.
Other factors like the investor’s repayment capacity are also considered at the time of availing of a loan. Therefore, we hope to provide you with valuable insights related to Gold Loans.