A gold loan is still a prevalent means of financing due to its ease of approval and convenient repayment plans. If you’re planning to apply for a gold loan, you ought to know whether you’re eligible and, if so, what documents you’ll need to submit and how you can apply.
Gold Loan: An Overview
A gold loan is a secured loan where you pledge your gold to borrow money from a bank or NBFC. The lender will sanction the loan amount based on the current value of the gold. According to RBI guidelines, lenders can offer up to 75% of the gold value as the loan amount.
Eligibility Criteria for Gold Loan
Eligibility may differ across lenders. Here’s a general guide:
- Age: 18-70 years old
- Nationality: Indian (residents and non-residents)
- Gold:
- You must own the gold being pledged.
- The gold should be of the highest purity, generally 18-24 Karats.
- The gold should be in the form of jewellery or coins.
Note that NRIs applying for a gold loan are required to apply with a co-applicant.
Documents Required
Though gold loans have minimal paperwork, certain documents are mandatory to verify your identity and address. Here’s a list of commonly required documents:
1. Identity/Address Proof (KYC Document)
You can submit any one of the following:
- Aadhaar Card
- PAN Card
- Voter ID
- Passport
- Driving License
2. Passport-Sized Photographs
3. PAN Card
4. Application Form
How to Apply for a Gold Loan
You can apply for a gold loan online or by visiting the branch:
- Visit the bank branch along with the gold ornaments and required documents.
- The lender will weigh and assess the purity of the gold to determine the market value.
- Based on the LTV ratio, the lender will offer the loan amount.
- Fill out and sign the application form.
- Choose the repayment tenure and mode (Bullet or EMI).
Once approved, the loan amount will be disbursed to your bank account, or the lender will give you cash. According to Section 269 SS of the Income Tax Act, 1961, you are not permitted to receive more than ₹20,000 as a loan in cash.
For online applications, you can start the process online by filling out the application form on the lender’s website. However, to get the gold evaluated, you are still required to visit the branch. You may also opt for doorstep services (if such services are provided by the lender).
Also Read: Understanding Loan Repayments with a Gold Loan Calculator
Tips to Remember When You Apply for a Gold Loan
1) Use a Gold Loan Calculator
A gold loan calculator can help you estimate the loan amount based on the weight and purity of your gold. You can understand how interest rates and tenure affect your monthly cash flow and plan your repayment strategy more effectively.
2) Choose a Trusted Lender
Make sure you compare interest rates, processing fees, loan-to-value (LTV) ratio, and security measures for your pledged gold. Consider a reputed bank that offers transparency, secure gold storage, and flexible repayment options.
3) Know the Value of Your Gold
The value of your loan depends on the purity and weight of the gold you pledge. Most lenders will accept gold of 18K to 24K purity.
4) Understand Your Repayment Options
Lenders typically offer multiple gold loan repayment modes:
- EMI
- Bullet repayment (interest only during the tenure, principal at the end)
Choose the repayment option that matches your income flow. Use a gold loan calculator to help visualise and compare these options beforehand.
5) Avoid Over-Borrowing
Just because you’re eligible for a higher loan does not mean you should take the entire amount. Borrow only what you need and what you can repay comfortably. The gold loan calculator can help you assess your repayment capacity.
The Bottom Line
Gold loans are a quick, convenient, and relatively risk-free way to access funds. The eligibility criteria are minimal, and documentation is pretty straightforward.
Before you apply, compare offers from multiple lenders, understand the terms, and keep all required documents handy. That way, you can get the funds you need without delays while your gold remains safe until the loan is repaid.
Also Read: How Does Bridging Finance Work?