User Guide: All You Need to Know about Getting a Gold Loan in India

User Guide: All You Need to Know about Getting a Gold Loan in India

Gold prices have sky rocketed in the past few months. Amid constant pay cuts and reduced business profits due to COVID 19 & subsequent lockdowns, more and more people are looking for cost-efficient ways to avail of cash for a mix of their financial needs.

The dual health and financial crisis has made it compulsive to reset finances for meeting your present & future life goals. Herein Gold Loan has a pretty high lustre as people can borrow fast, hassle free and affordably against their old gold coins, bars and jewellery articles. Incidentally Gold Loan companies have also reported a huge surge in demand for loans against yellow metal.

Borrowing Amidst COVID Times: Gold Loan or Personal Loan? Gold Loan or Personal Loan: What to Choose

So, let’s unleash the power of the GOLD in your locker and find out if a Gold Loan is a better choice than a Personal Loan. We will also elucidate all the points you must know before applying for a Gold Loan here.

Gold Loan: Highlights

Product

Gold Loan

Type of Loan

Secured

Collateral

Gold coins, bars, jewellery, ornaments etc

LTV

Up to 75%

Rate of Interest

10 – 16%

Tenure

12 – 24 months

Mode of Application

Branch, digital or at doorstep

Steps to apply for Gold Loan in India:

You can Apply for Gold Loan by visiting the lender’s branch or by booking an appointment for a home visit.

When you visit the branch, follow these steps:

1. Visit the lender’s branch.

2. Carry Gold to be pledged (such as jewellery, bars, or coins) along with KYC documents to prove your identity & residential address. Aadhaar Card & PAN Card will be sufficient to prove identity. You may also carry along purchase receipts or grading certificate of gold.

3. As you share your consent to pledge the Gold, the lender will evaluate the purity of the metal.

4. As per the value of the gold, the lender will quote the loan amount, rate of interest & mode of repayment.

5. On your acceptance of the offer, the amount will transferred to your account and the gold will be booked by the lender as collateral.

 

Apply for Gold Loan Online

 

When you apply Gold Loan online and request for home-visit:

You can contact the lender online and request for a home visit for valuation of the metal. Recently Muthoot Finance also launched an at home Gold Loan option.  Steps to be followed are-

1. Request for home visit either through the lender’s portal or app.

2. A company’s evaluator will visit your home and share a ball-park amount for loan.

3. It can act as an Instant Loan, as the amount will be disbursed as soon as you accept the offer.

How do Gold Loans Work?

As per RBI’s directive a lender cannot offer more than 75% of the market value of the pledged metal as Gold loan. Thus, the step to evaluate the purity of metal and LTV (loan to value) is a crucial one.

After the consent of the borrowers on the assessed loan amount and rate of interest, the loan amount is disbursed to the customer’s bank account. Now the customer can withdraw money as per the requirement.

With Gold Loans, customers get option to pay interest only EMIs, just like an overdraft account. They get choice to make bullet repayment at the time of maturity. They can also apply for extension of loan at the end of tenure. Being a secured loan, the lenders will accept the re-pledging request as long as customer wants.

The fine details vary across the lenders. Some lenders however will also accept pre-closure request of loan with full payment of interest & principal amount without any penalty.

Why apply for Gold Loan?

You can borrow, without disrupting your cash flows.

You avail of Gold Loan against jewellery that may be sitting idle in your bank locker or otherwise. Besides, there always is option to repay as bullet payment later on. Thus gold loans are perfect to get instant access to funds without pinching your financials. They are affordable and easy to manage during cash lapses. The collateral is safe with the lender and will be returned as you repay the loan.

High value loans for emergency

The value of gold never depreciates; instead it keeps on appreciating over the years. You can use the gold forever to pledge for urgent cash. Thus Gold Loans come handy for urgent cash requirements.

Repayment flexibility

Another USP is the flexibility to repay Gold Loan as per your financial situation. You can choose regular EMI method or a lump sum balloon payment option before expiry. This feature genuinely makes Gold Loan equivalent to handholding during the financial crisis.

Things to watch out for:

Loan Quantum

You cannot borrow more than 75% of the value of gold pledged. Also, different lenders will offer different value against your asset which will primarily change due to fluctuation in Gold prices.   Thus, the quantum of loan may fall below the expectations during crisis.

Risk of losing asset

Being a secured loan, there is always a risk of losing out ownership of the asset in case of the default. The lender has a right to liquidate the metal pledged if the borrower fails to meet the loan obligation. The tenure for repayment extension will also involve late payment charges. Thus there is a constant stress of securing back your gold back with repayment of loan, which may look as a daunting task in case of financially pressing days.

Impact on Credit Score

The feature of balloon payment may appear attractive in the short run, however in case you fail to arrange for required funds in time, it can take a double toll on you. Not only will you lose your asset, but will also hurt your credit score.

Thus it is prudent to assess your financial health well before you opt for a Gold Loan. It is always recommended to use professional help to make informed financial decisions.

 

Also Read: Top 10 Gold Loan Companies in India – Interest Rates & Benefits

 

To apply online for Home Loan, Personal Loan, Credit Card, Business Loan & LAP visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 100+ Banks and NBFCs. We have served 4 million+ happy customers since 1989.

 

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Category: Gold Loan