What Is A Gold Loan?

 

Gold loan is a method of availing a loan against your gold coins or gold jewellery like bangles, necklaces, bracelets, earrings, pendants, watches, and so on. These gold items will serve as collateral, against which you can avail the loan from a lender. Quantum of the loan will depend on the rate of the gold pledged. This is a very efficient method of mobilizing personal assets like gold to meet a financial emergency.

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What Is A Gold Loan?

 

1. Why a Gold Loan?

 

Gold loans help you meet immediate financial requirements. Some of these are as follows:

• Gold loans interest is lower compared to the other available options like a personal loan.
• Gold loan has a very flexible tenure and it varies from a few days to 5 years.
• Many banks and NBFCs do not levy pre-payment charges on gold loans.
• Gold loans have minimal documentation.
• Faster disbursement of the loan is another attractive feature of gold loans.

 

2. Features of a Gold Loan

 

Purpose of availing the gold loan:

 

Banks and NBFCs are not concerned with why you avail the gold loan. You can avail a gold loan from any available lender/bank in order to finance various needs like a good education, a medical emergency, going on a holiday, further investment and so on.

 

Gold loan is a secured loan:

 

The gold which has been pledged with the Bank or Financial Institution is the security or collateral against which the loan amount is provided.

 

Tenure of a gold loan:

 

The tenure can range from a minimum of just 7 days to a maximum of 5 years.

 

Applicable fees on a gold loan:

 

The other fees and charges that might be applicable on a gold loan are: Processing fees, late payment penalty for non-payment of interest, valuation fees and so on.

 

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Repayment Options on a gold loan:

 

There are three options made available by the lenders to borrowers for the repayment of a gold loan. They are:

• Repayment in Equated Monthly Installments (EMIs)
• Payment of interest upfront and repayment of the principal loan amount at the end of the loan tenure.
• Payment of interest on a monthly basis and repayment of the principal loan amount at the end of the loan tenure.

 

Rebate on gold loan:

 

If the borrower repays interest regularly, then many lenders offer the option of a discount on the prevailing interest rate on the loan against gold. This rebate can range from 1-2% off on the original rate of interest.

 

Gold Loan Interest Rates:

 

Gold Loan interest rates differ from lender to lender. Some lenders offer various gold loan schemes considering different income groups which are specifically designed to meet the requirements of borrowers. The gold loan interest rate in India ranges from 14% to 23% a year. However, these rates are subject to change from time to time. NBFCs accept only gold ornaments as collateral and not gold coins or gold bars.

 

Documents required for a Gold Loan:

 

The following documents are generally provided by the borrower in order to avail a gold loan:

• Properly filled application form
• Passport sized photographs
• Identity proof like PAN Card
• Address Proof like Passport or Aadhaar
• Signature Proof
• Form 60 or PAN card
• Proof of age like a Birth Certificate

Post-loan disbursement documents, if any.

You can always avail a gold loan in an emergency and save a lot of money in interest payments, as these rates are much lower than a personal loan.

 

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