Since gold also has immense financial significance, people often liquidate it to acquire funds at the time of their needs.
Due to the rise in the popularity of gold loans, multiple Non-Banking Financial Companies (NBFCs) are offering various attractive perks to borrowers. Read on to learn all the information about gold loan to help you utilise them correctly.
What is a gold loan?
It is a secured loan where borrowers pledge gold items to obtain funds. The loan provider evaluates the gold objects, checks the applicant’s eligibility, and approves loans of up to a certain amount depending on the loan-to-value (LTV) ratio. People can get their items back after successfully repaying the debt.
If an individual cannot pay the loan amount or defaults, lenders sell the pledged gold items to recover the loan amount.
There are several advantages of taking a gold loan.
Benefits of a gold loan
Since gold has a high market value, people often sell gold jewellery and other items to fulfil monetary needs. A gold loan is a better option since people can get the things back within a set period rather than permanently losing them.
Other than this, a gold loan has several other positive aspects. They are as follows-
- Sizable loan amount
Lenders provide a loan of up to 2 crores on pledged gold items, depending upon their quality and quantity. Usually, 22 karat is the standard that they consider for sanctioning it. People can get 75% of the value of their gold objects as a loan.
- Multiple options for repayment
NBFCs offer several options to borrowers to pay back loan amounts, making it customer-friendly. There are 3 ways in which people can repay the loan-
- Individuals can pay the interest at the beginning of the tenure and then the principal amount later.
- People can pay interest periodically and principal amount at the end of loan tenure.
- There is also an option to repay the loan through EMIs.
- Competitive interest rates
Since a gold loan is secured, lenders usually charge lower interest rates on these loans. The low-interest rate reduces the overall cost of borrowing. People also get the option to choose between fixed and floating interest rates. This helps them repay the debt amount with ease.
- Zero part-prepayment and foreclosure fee
Lenders also extend the feature of no penalty charges on repaying the loan before time. This helps individuals become debt free before the completion of loan tenure.
- Long tenure
Most lending companies have a maximum term of 12 months on gold loans. This gives people enough time to plan their repayment and get their items back.
- Free insurance for gold
When borrowers opt for a gold loan, they also get complimentary gold insurance which protects the items against misplacements and theft.
- Zero gold loan processing fee
Lenders often provide the benefit of zero charges on gold loan processing. People only have to pay nominal charges like stamp duty, auction charges etc.
The application process for a gold loan is straightforward.
Gold loan application process
Here is a step-by-step guide to applying for a gold loan-
Step 1: Visit the official portal of your preferred lending institution.
Step 2: Locate the gold loan page and click on the “Apply Now” button.
Step 3: Next up, the gold loan online application form will appear on your screen.
Step 4: Fill up this application page carefully with all the details and enter the loan amount you wish to borrow.
Step 5: Provide your PAN details, 10-digit mobile number, and area pin code and click on “Submit Details”.
Although the loan application process is easy, people must also know whether they are ideal candidates for the loan.
Gold loan eligibility and documents required
To avail of a gold loan, an individual has to be an Indian citizen between 21-70 years of age. The gold items they want to pledge should be 22 karats.
People also need to submit any of the following documents during the verification process-
- Aadhaar card
- Voter ID
- Driving license
Lenders may ask for a PAN card in case of a loan above Rs. 5 lakh.
The information mentioned above about gold loans will help customers take the best course of action while taking a loan. Moreover, knowing about its various features will help people smoothly utilise all its benefits.