A form of secured loan, gold loans are a pretty safe bet in the present scenario. You go to a bank to submit your gold and get a certain amount. Once you repay the amount with interest, the deposited gold is back in your hands. A handy aid in case one needs quick cash.
A gold loan offers many benefits over regular loans. It has been in practice for ages. The lender can be someone in the unorganised sector like a moneylender. But a safer play is to take a gold loan from the organised sector. NBFCs lead the gold loan market in the organised sector because they offer various advantages. Their functioning is very smooth. But there are many aspects that you need to be aware of while applying for a loan. You have many doubts while applying for a gold loan. Let us try the clear the basic facts one should know.
As explained, you go to a lender who can be NBFC and pledge your gold. In return, they will evaluate your ornaments according to market rates. You can expect up to 75% value of the gold as the loan amount. Once you repay you get back the gold, you pledged.
What can we deposit to get a loan?
Any kind of gold ornament is acceptable. The loan amount you get will depend on the purity of the gold you will deposit. Obviously, the higher the purity more is the money you get. The exceptions are gold bars, coins and billions. Banks do not accept these while letting out a gold loan.
How does one avail a gold loan?
The process is fairly simple. You walk in a bank or an NBFC and deposit your gold. They will assess the purity of your ornaments. Then they will decide the loan amount you are eligible for. Aa per the guidelines of RBI you can expect up to 75% of the value as loan. To finalise you will have to pay the processing charges as per the policy of the lender you choose.
Is it safe to deposit your gold?
If you choose a lender from the unorganised sector, essentially there is no guarantee. Same goes for unlicensed banks. There are risks like theft of your gold involved. The best is to go for an unorganised sector money lender. These include banks or NBFCs. A very good choice is the HDFC bank. The HDFC gold loan interest rate is also very reasonable. They secure your gold in a vault. Thus this ensures maximum security possible. One can take a sigh of relief while depositing with such banks.
Are there any documents needed?
Yes, of course! The documents required are straightforward. They include
- One passport photograph. (Some lenders may require more. Keep them handy)
- One ID proof. These can be :
- Aadhar Card
- Driving license
- Address proof. Can be any of the following:
- Electricity bills
- Phone bills, etc.
- PAN card. If you do not possess one, you can submit a Form 60.
Who can apply for a gold loan?
Anyone above the age of 18 is eligible for a gold loan. You can simply submit your gold and walk out with the cash.
How long does it take for the loan to get authorised?
A gold loan can get approved at a lightning pace. In fact, a veritable bank like HDFC will do so within 45 minutes. Of course, your documents need to be complete.
How do you repay a gold loan?
This is where the major advantage of a gold loan lies. Gold loans are famous for their flexible repayment schedule. Several options exist from which you can choose as per your capability.
- Overdraft facility: A unique option. You have to pay the interest on only the amount used and not the entire amount.’
- Interest Upfront: Here, you pay the entire interest at the beginning of the tenure. The principal amount of payment is at the end.
- Bullet repayment: No concept of EMI. You pay the entire amount along with interest at the end of the tenure.
- EMI: This is the standard option wherein you pay a fixed calculated amount every month. The payment goes on till the end of your tenure.
How long can we take a loan for?
This is essentially the repayment tenure. It can be anything from 6 months to 2 years. Most lenders have their own policies when it comes to loan tenure.
What about interest rates?
Gold loan interest rates are another reason that they are so popular.
The interest rates are significantly lower than those of normal loans. Can be within the range of 11% to 17% depending on the lender. HDFC bank offers very competitive interest rates for gold loans.
Bank or an NBFC?
Gold loans are widely available across the country from banks and NBFCs. The choice is up to you. However, banks offer certain advantages. These include better security and faster turnaround times.
What are the charges applicable while applying for a gold loan?
The charges involved are usually processing fee and repayment fee. Some may also have validation charges. Beware, some do not disclose all charges. Make sure you learn about all charges involved before applying.
We saw some of the basic things that you should take a note of while applying for a loan. Now, all that remains is for you to go and apply for that gold loan!