Taking loan money against a gold deposit is a quite common practice. Lenders disburse money against gold security given to them. The funds obtained can be used for your medical, business, or other financial requirements without relying on anyone and fulfilling your needs alone. While a gold loan is a comparatively easy way to get hold of urgent funds, you might have numerous doubts about it.
Gold is a valuable metal that maintains its value over time, even if it goes through highs and lows in costs caused by geopolitical events or economic policies. It still retains its sheen and appeal for most families. Due to this, it is believed that every home will have a gold stack that they can fall back on in hard times.
Whether the challenge is funding a child’s higher education, raising funds for building a house, or even emergency medical expenses, gold is always a savings that you can fall back on. Availing the best gold loan bank might seem very simple and easy at first. However, there are certain things you need to be aware of before you apply for a gold loan. Knowing this in advance will help you make the most of the amount you get from your gold and make sure that it is protected and that you can repay the gold loan and regain your gold.
Benefits of gold loan
You must wonder if you select a gold loan over the other types of loans available in the market at present. Here are some benefits of gold loans:
- When taking a gold loan, very little documentation is required.
- The gold loan interest rate 2024 is much lower than the interest rates on personal and similar unsecured loans.
- You do not have to worry about your employment history, credit history, age, etc., when applying for a gold loan.
- There is no need to submit any proof of credit history or income proof.
- There are flexible repayment options.
- There is typically no pre-payment on gold loans, even though some lenders can charge up to 1% of the outstanding loan amount as the pre-payment penalty.
Different repayment options on gold loan
Gold loans provide you the flexibility of diverse repayment options such as:
- EMI or Equated Monthly Installments, where you have to make monthly payments regularly
- Bullet payments, where the interest component of the loan is subtracted upfront from the loan amount. This has to be repaid together with the loan amount at the end of the tenure.
- Interest now, principal later, where the interest component is paid first as EMI during the loan tenure and the principal component of the loan is paid afterward at the end of the tenure. This is provided only by NBFCs at present.
You can get a gold loan from a reputed bank or NBFC (Non Banking Financial Company) that the Government regulates. This guarantees that your gold is in safe hands. There are NBFCs that focus on gold loans and offer more enticing interest rates and other beneficial features to the borrower. It is best to compare the features and interest rates of various banks and NBFCs before deciding where to avail a gold loan from.
Type of gold that can be pledged
The higher the purity of the gold, the higher the valuation amount, which means the higher the loan amount you get. The lenders expect the minimum purity to be 18 karat gold. Also, if you are pledging jewelry with precious stones or gems set into it, their value will not be considered when deciding the loan amount. Only the gold’s value will be considered for the loan. You are most likely to get a gold loan on gold coins instead of gold bars. Coins should have a purity of more than 99.99 and can go up to 50 grams.
How much loan will a person get for gold?
This depends on the lender, but most offer up to ninety percent of the gold value as a loan. No lender will provide 100% of the gold value as a loan.
Essential points to remember
Following are some points to keep in mind for gold loans:
- The repayment term can vary from 1 year to 24 months and depends on the lender
- You can get your gold insured so that you will still get compensation in case of theft or other such unforeseeable circumstances. Gold insurance is provided by lenders too.
- Some lenders will charge a nominal processing fee of up to 1% of the gold value or loan amount.
- There might also be a valuation charge which is waived by some lender who has an internal valuator.
- Interest rate differs from lender to lender but can vary from 12% to 16%
- Anyone more than the age of 18 can apply for a gold loan
- Only KYC or Know Your Customer documents are required
A gold loan is possibly the fastest and easiest loan that anybody can take if they have the resources to avail it. Knowing the significant points mentioned above can help you make the best decision to avail your gold loan while getting the maximum loan amount and guaranteeing that your gold is safe and secure.