Gold, as an asset, is quite common among individuals. Gold has both, traditional as well as ornamental value and is, therefore, found in almost all households of India. Individuals buy gold jewellery, gold coins, bullions, articles, etc. Wouldn’t it be good if the gold that you own can give you funds when you require it?
Gold loans are a popular form of personal loan. These loans are offered by all leading banks and non-banking financial institutions. Under the loan, you pledge your gold assets as collateral, and against the value of your gold, you get a loan. The loan can be used for any personal or business-related need. Though a gold loan is a type of personal loan, the interest rates and gold loan rate are lower because the loan is secured in nature.
While you might know the concept of gold loan, do you know how the loan works? Let’s understand:
Eligibility parameters for the loan
To avail of a gold loan, you have to fulfil some common eligibility parameters. These include the following –
- Your age should be between 21 years and 65 years
- You should either be a salaried employee or a self-employed businessman or professional
- The purity of gold ornaments which are being offered as collateral should be between 18 and 24 carats
How to avail the loan?
To avail a gold loan, you would have to follow the below-mentioned steps –
- Offer your gold ornaments to the lender from whom you are seeking the loan.
- The lender would value the gold ornaments and then calculate the loan amount. The valuation is done based on the rate of gold on the date of valuation. The purer the gold is, the higher would be its valuation, and the higher would be the loan amount offered.
- The lender specifies the loan amount available against the pledged gold
- If you want the loan, you have to fill up an application form and pay the loan processing fee
- Your KYC documents would also have to be submitted to complete the application
- The lender would verify the application and sanction the loan
- You would get the loan funds in your bank account.
Essential aspects of the loan
Here are some important aspects of a gold loan which you should know –
- The interest rates on loan start from 10.50%
- Loans of up to 75% of the value of the gold are offered
- If there are precious and semi-precious stones and metals in the ornaments, their value would not be considered in the valuation of gold
- Repayment of the loan can be made within 36 months
- There are different types of repayment options to repay the loan. You can pay only the interest during the repayment tenure and pay the principal when the tenure comes to an end. Alternatively, you can pay the total interest and principal when the tenure ends. You can also choose the normal mode of paying the loan in EMIs.
- The gold that you pledge would remain in the custody of the lender till the loan is repaid.
So, if you have gold ornaments in your possession and you are looking for a simple personal loan, you can opt for a gold loan. The loan is readily available, has simplified eligibility parameters and can be used for multipurpose needs making it an attractive financing solution.