In most Indian homes, there is a stash of gold that is sitting unused. However, the good news is that you may put them to good use when you need them most. In the event of an emergency, you may be able to borrow a loan against gold. Pledge your gold rather than sell it off. This is the only way you may borrow money against your gold. Banks and non-bank financial institutions (NBFIs) around India provide gold loans to their customers at competitive interest rates. As a rule of thumb, you should be aware of the process, benefits, and drawbacks of a gold loan before applying.
Procedure
Each lender has its unique process for a gold loan. In a gold loan, you put up your gold items as collateral and receive the loan amount in return. To do so, you must travel to a lending institution with your gold and the necessary paperwork. Based on the gold’s purity and weight, the lender estimates the gold’s market worth. Pledged gold can be worth up to 80% of the loan’s computed value, but no more. The documents are authenticated once the value of the gold promised is determined. Your lender will approve your loan if everything looks excellent and promising to them. You can apply for gold loans online using the bank or NBFC mobile application, as well as through the company’s website and official app. Although you can apply for a gold loan online, you will still need to meet with your lender in person. To use the online gold loan, you’ll need to visit your lender at least once to deposit your gold items. ‘ A customer site or a mobile app will then allow you to register and link your bank account to the lender. Rupeek.com offers a gold loan option as well. An online platform that allows you to check your gold loan eligibility, compare multiple banks and NBFC gold loan programs, and acquire loan approvals swiftly is available on this site
Interest rate
What is a gold loan?
A gold loan is a secured one as opposed to an unsecured one like a personal loan, its interest rate is lower. Gold loan interest rates vary from lender to lender and are dependent on a variety of parameters, such as the length of the loan and the amount borrowed.
Gold loan tenure
One lending institution may have a shorter prepayment time or longer gold loan term than another. In most cases, it lasts for three to twelve months. Depending on the situation, some lenders may even prolong the term of the loan or allow you to extend the term by renewing it. Defaulting on gold can result in the loss of all of your gold items.
How can the gold loan be repaid?
Your lender has the last say on how you can pay back your gold loan. Loans from most financial institutions require a minimum monthly payment of interest and final principal repayment. Paying your gold loan through EMIs (Equated Monthly Installments) is another option, which includes both the principal and interest.
Benefits of Gold Loan
● Faster processing – Gold loans are secured loans, which means they have more relaxed qualifying requirements and less paperwork. Loans can be approved even if a borrower does not have a credit score.
● Lower interest rate – Gold loans, which are secured loans, have lower interest rates than unsecured loans like personal loans.
● No processing fees – In many cases, banks and non-bank financial institutions (NBFCs) do not charge processing costs for gold loans.
● No foreclosure charges – In some cases, lenders don’t impose any prepayment penalties at all; in others, there is a 1% prepayment penalty charged by the bank.
● Income proof is not needed – Lenders typically do not ask for proof of income in gold loans because the loan is secured by gold. As a result, a gold loan can be obtained by anyone, regardless of income level.
● The credit score is not required – It is not necessary to have a good credit score – Your credit score isn’t a factor in getting approved for a gold loan, which is unusual.
Disadvantages
● Loan-to-Value Ratio – A proportion of the market value of the pledged gold is used to determine how much money you get back in a gold loan. The loan amount is determined by the LTV (Loan to Value) ratio. This percentage varies from one lender to the next and can go as high as 80% of the pledged gold’s worth. This means that if your gold is valued at Rs. 5 lakh on the market, you can only get Rs. 4 lakh in cash.
● Due to loan default, you can lose your gold – if you fail to pay back a loan, you could lose your gold. Gold loan lenders have the legal power to seize and auction your possessions if you default on your debt.
Conclusion
The most common form of currency in India, gold, is still preferred by the majority of Indian families. The price swings of gold give investors multiple opportunities to buy the precious metal. Gold can be used to secure a long-term loan. It is logical to assume that borrowing money against gold assets is preferable to borrowing money from a bank.
About The Author
Dan Taylor
Dan is responsible for content marketing and branding at GuestPostBlogging. He writes about topics related to startup naming, branding and entrepreneurship.
