A gold loan is considered one of the most secured loans that a lender (banks and Non-Banking Financial Organisations) can provide to a borrower. When an individual borrows a loan against gold, he pledges a certain amount of gold to the lender as collateral or security and based upon the market value of the gold, the lender gives the loan amount to the borrower. The borrower then repays the loan EMIs periodically for a fixed tenure or goes with the generated interest amount and gets the gold back.
Getting a loan against gold is a common practice in India. The lenders offer money to the borrowers after receiving a certain amount of gold as security to the loan. A borrower mostly uses the money for medical expenses, education, business purposes, or other needful. It is a quick and easy way to arrange some money within a short period.
This article will act as a thorough guide before you make up your mind to opt for a loan either by visiting the lender or apply gold loan online.
Why is gold a secured form of loan?
Gold is considered one of the most secured forms of loan because the borrower deposits a certain amount of gold to the lender. Based upon the market value of the gold, the lender disburses money accordingly. On successful repayment, the gold is given back to the borrower. However, in case of faulty repayments, the lender possesses the sole right to sell off the deposited gold and get back their money.
In what form can you pledge the gold?
You can get a loan against gold by depositing any type of jewelry and ornaments to the lender. However, the quality of the gold determines how much money you can avail of against it. Banks do not offer loans against gold bars, biscuits and coins.
How to avail of a gold loan?
There are two options to apply for a gold loan- either by visiting the lender’s office or applicants can also apply gold loan online. Lenders will scrutinize the purity of the gold and will sanction an appropriate amount accordingly. The RBI has set limits for different lenders on how much amount they can provide to borrowers. But the minimum amount that they can offer is 75% of the total value of the gold. The lenders can also charge processing fees according to their own policies from the borrower.
How safe is your gold with the lender?
If you are depositing your gold to an unlicensed lender, there is a risk of misplacing, swapping, or losing your gold completely. But if you are pledging it to a reliable lender, they will assure the proper safety and security of your gold. These lenders keep the gold in secured vaults, so it doesn’t get lost in any way.
What are the required documents and scheduled age criteria to get a gold loan?
Here is the list of required documents to get a gold loan:
- Photo ID- this could be your Aadhar Card, Driver’s License, Passport
- Address Proof- electricity bill or phone bill
- PAN Card (you can also submit Form 60 if you don’t have a PAN Card)
There are certain age limits to apply for gold loans, but these limits vary based on different lenders’ policies. However, the minimum age to avail gold loan is 18 years and the maximum age is 75 years. Many lenders have also set gold loan approval limits from 21 years to 65 years.
How much time does it take to get the approved money?
Because it is a secured form of loan where lenders receive and assess the security within minutes, they take about an hour to disburse the loan amount.
What are the repayment options in gold loans?
There are mainly four gold loan repayment options that you can choose from as per convenience.
- Upfront interest: Pay all the interest at the beginning of the tenure and pay the principal amount at the end.
- Bullet repayment: You do not pay EMI periodically to repay the loan. The entire repayment (principal amount + interest) will be made at the end of the tenure.
- Regular EMIs: You pay regular EMIs every month to repay the loan.
- Overdraft facility: Here, you pay the interest only on the amount that you have utilized and not on the entire sanctioned amount.
What are the interest rates on gold loans?
As compared to other forms of loan, such as loan against credit cards or mutual funds, the gold loan interest rate is lower. The interest rate on gold varies from lender to lender, but generally, it lies between 11% and 17%.
Here’s hoping that the points discussed in the article were knowledgeable enough to help you get a gold loan in India without any hassles.