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written by | March 30, 2022

A Brief Overview of Gold Loans

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Are you in urgent need of money and are selling your gold jewellery? You can take a gold loan instead of this. Gold loans are similar to mortgage loans which many people take. Let us dig into the meaning of gold loans to give you a clear understanding of the same. Gold loans are loans where you can avail money by keeping their gold ornaments such as jewellery, bracelets and watches in financial institutions or banks. In this type of loan, the money which can be borrowed depends upon the purity of the gold. Therefore, the gold kept in your locker can be used without any tension or complications in case of medical emergencies. Learn more about how gold loans work and save yourself from being tense over money for the emergency requirement.

Did you know?

India's gold lending is becoming the most popular lending sector for borrowers when the banking industry has been hit by the COVID-19 outbreak in India, according to the data collected by RBI. According to data, as of August 27, banks were able to issue loans of about ₹6292.6 crores, an increase of 66% over the previous year. Banks have found that most customers tend to use gold loans because they are considered a safe and secure form of a loan. The second most popular lending sector is reported to be the home loan sector.

How Does a Gold Loan Work?

The whole technique of gold loans is quite similar to different secured loans. On this, you take your gold articles to a lender at the side of the desired set of documents. The lender evaluates the gold articles and verifies the submitted files. As in step with the opinions, the lender sanctions the mortgage quantity. According to the mortgage settlement, you repay the important quantity at the side of the interest quantity and get the pledged gold articles back.

Also Read: What are the Different Types of Loans in India?

Gold Loan: Rate of Interest

Gold loan interest rate is low in evaluation to unsecured loans as it includes a personal mortgage. The interest quotes levied on the gold loan vary from one lender to another and rely upon various factors: gold loan tenure, loan amount, etc. Banks generally price lower gold loan interest rates than NBFCs. Consequently, if you plan to apply for the gold loan, do not take delivery of the first offer you get. Evaluate gold loans from a minimum of two to three lending institutions and then make your preference. You can avail of a gold loan from a financial institution in India with interest costs ranging between 7% p.a. and 29% p.a. You could avail a mortgage amount of as much as ₹1.5 crores and compensation tenure for the gold loan starting at 3 months and going as much as four years depending on the loan scheme available by way of you. You could pledge your gold adorns and jewellery for funds in the event of an economic emergency.

Eligibility for Gold Loan

If you wish to avail of a loan in opposition to your gold jewellery or embellishments, you must make certain that you meet the eligibility standards detailed through the lender. Keep in mind that the eligibility criteria will range from lender to lender. As a result, it is beneficial to test the eligibility criteria at the lender's internet site before applying for a gold loan. Indexed under are the generalised eligibility standards. 

Applicant's Age 

  • Above 18 years of age 

Mortgage

  • Gold ornaments or objects

Quality of Gold

  • 18 karat and above

Other Requirement

  • Depending upon the lender

Gold Loan Documents

Generally, the following files have to be provided by the borrower on the way to avail of the gold loan:

  • Duly-stuffed utility form
  • Passport sized pictures
  • Identification evidence
  • Address evidence
  • Signature evidence
  • Form 60 or PAN card
  • Evidence of age
  • Publish-loan disbursement documents, if any.

How to Apply for Gold Loan?

To apply for a gold loan, you may need to go through the following steps mentioned below:

  • Step 1: You will be able to apply for a gold mortgage through online or offline channels. To apply online, you may want to go to the lender's internet site and click on the mortgage product you wish to apply for, which might be 'Gold loan'. Next, you will want to click on 'practice now' if this selection is available on the internet site. Submit this, and you should enter the specified information into the web software form and put up the form online. 
  • Step 2: If there may be no choice to observe for the mortgage via the lender's internet site, you may need to visit the closest department of the lender. Many creditors give clients the option of finding the nearest branch through their authentic website. Make sure to hold a copy of the required documents with you.
  • Step 3: After you post the application form, the lender will affirm your utility. If the application gets accepted, you'll acquire the mortgage amount.
  • Step 4: A gold loan is quick and easy to get the price range in a monetary emergency. Make sure that you do the desired research and avail a gold loan appropriate for your necessities and compensation capability.

Also Read: How to Apply for the Best Business Loan in India? - Types of Govt. Loan Schemes

Benefits of Gold Loan

A gold loan is indeed a very beneficial loan. It has a simpler process than most of the other banks. It also does not require proof of income, unlike many mortgage loans. Below are the listed benefits of having a gold loan.

  • Security: The gold is safe in the hands of the lenders. So, we do not need to worry about the security of gold. The gold is returned to its owner after the total amount is paid.
  • No worries about credit: The gold loan can be taken without worrying about a low credit score. Since gold is used as collateral, there is no need for them to check the history of the creditor.
  •  Tenure: Gold loans tenure is very flexible. It can be from 3 months to a maximum of 48 months. This time gives the borrower enough time to feel secure about putting their jewellery as collateral.
  • Easy process: The gold loan does not have a very complicated process for procurement. Banks do not need to worry about the borrower running away, and upon failing to do so, they can sell the gold legally.
  • Proof of income not required: The gold loans do not require the borrower to show their income proof to procure a gold loan. Gold loans only require you to prove your identity. The lenders do not need their income proof as the gold is given as collateral to them.
  • The choice to pay interest only: Gold loans have a unique function in which the borrower has the choice of paying the interest simply and can pay the significant amount at the time of mortgage completion.
  • Lower interest price: As those are secured loans, banks charge a lower interest fee than unsecured loans such as non-public loans. The interest charges are typically within 13% to 14%, whilst personal mortgage generally starts with an interest fee of 15%. In addition, if you connect any other security as collateral, it reduces the gold mortgage interest charge.

Conclusion

Our country has always been famous for its gold jewellery and ornaments culture. Most of the families who have gold do not know that they can also use it for borrowing money in case of an emergency related to your family and friends who are dear to your heart. Gold loans are loans that use gold as a mortgage to borrow the amount of money. The gold loans interest rate is low as compared to personal loans. This makes them all the more favourable to us when wanting to apply for a gold loan. This article thoroughly covers the working and meaning of gold loans. Now, you can stay stress-free while thinking about applying for a gold loan. 

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FAQs

Q: What are the benefits of a gold loan?

Ans:

Some of the benefits of having a gold loan are listed below:

  • Security: The gold is safe in the hands of the lenders. So, we do not need to worry about the security of gold. The gold is returned to its owner after the total amount is paid.
  • No worries about credit: The gold loan can be taken without worrying about a low credit score. Since gold is used as collateral, there is no need for them to check the history of the creditor.
  • Easy Process: The gold loan does not have a very complicated process for procurement. Banks do not need to worry about the borrower running away, and upon failing to do so, they can sell the gold legally.

Proof of income not required: The gold loans do not require the borrower to show their income proof to procure a gold loan. Gold loans only require you to prove your identity. The lenders do not need their income proof as the gold is given as collateral to them.

Q: How to calculate gold loan interest?

Ans:

The gold loan interest can be calculated by reducing the principal value from the total outstanding amount. The gold interest rate varies according to different banks and private lenders. So, the calculation of gold interest depends on the person we are borrowing the money from. It also depends upon various factors such as:

  • Gold loan tenure
  •  Loan amount
  • Gold percentage

Q: Specify the requirements for a gold loan.

Ans:

The gold loan does not have any heavy requirements. They can take a gold loan with the help of identity proof which proves that they are a citizen of India. In this type of loan, the value of gold is the main requirement for borrowing money. It is because the gold percentage determines the amount which they can borrow.

Q: What is a gold loan, and how gold loan works?

Ans:

Gold loans work in a similar way to other types of loans. In this type of loan, the loaner keeps the gold ornaments. They give an appropriate amount of money which depends upon the percentage of gold. When the principal amount and the amount of interest is paid, the jewellery is given back to the owner in these agreements.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.