Everything you need to know about Gold Loans

A gold loan is a secured loan that you can get by pledging gold ornaments as collateral with a lender (bank or NBFC). The lender will, in turn, give you a loan amount based on the market value of your gold. And after you complete repaying the loan amount and interest at the end of your chosen tenure, your gold is returned.

FP Studio June 28, 2020 12:28:31 IST
Everything you need to know about Gold Loans

Borrowing money against a gold deposit is a fairly common practice in India. Lenders disburse money against the security of the gold given to them. The funds received can be used for your business expenses, medical expenses or any other financial needs without depending on anyone and fulfil your needs on your own.
While a gold loan is a relatively easy way to obtain urgent funds, you may have several doubts about it. So, here's a list of common questions and expert answers to help you out.

Everything you need to know about Gold Loans

What is a gold loan?
A gold loan is a secured loan that you can get by pledging gold ornaments as collateral with a lender (bank or NBFC). The lender will, in turn, give you a loan amount based on the market value of your gold. And after you complete repaying the loan amount and interest at the end of your chosen tenure, your gold is returned.

What type of jewellery can you pledge?
You can pledge gold ornaments; the purity of gold will determine how much you can borrow. Note that banks don't accept gold bars, coins or bullions for loans.

How can you avail a gold loan?
Once you take the gold to a lender, they will assess its purity and tell you the loan amount that you can borrow. As per RBI guidelines, this amount can be up to 75% of the value of the gold. You have to pay a processing fee which is charged as per the bank’s policy.

Is your gold safe with the lender?
With an unlicensed bank or NBFC, you could be running the risk of your gold jewellery being misplaced or swapped. This is why it is advisable to apply for a gold loan from a reliable lender, such as HDFC Bank. And since it is secured in a vault, you don't have to worry about the safety of your gold. Hence, with the guaranteed safety of your valuable procession, you can have better peace of mind.

What documents will you need?
Along with one passport photograph, you need to submit any one of your identity proofs (passport, driver's license, Aadhaar card) and address proof (electricity bills, phone bills). If you don't have a PAN card, you can submit Form 60.

Who can apply for a gold loan?
Anyone who is 18 years old and above can pledge their gold to apply for a gold loan.

How much time is taken to sanction the loan?
With all your documents in place, a trustworthy bank, like HDFC Bank, can disburse the loan amount within just 45 minutes over the counter.

What are the available gold loan repayment options?
Lenders like HDFC bank offer multiple easy and convenient repayment options that you can choose from based on your preference and convenience:
Upfront Interest: Pay the entire interest at the beginning of tenure and principal at the end.
Bullet Repayment: There is no EMI involved here; you pay both the principal and interest amount together, at the end of the loan tenure.
Regular EMIs: Repayment is in the form of EMIs
Overdraft facility: This is a facility where you pay interest only on the utilized amount

What is the repayment tenure?
The repayment tenure for gold loans is usually between six months and two years, depending on the lender. For instance, HDFC Bank gold loan tenures start from 6 months and go up to 24 months. Some lenders also offer an extension on the tenure by renewing your loan. However, this could incur more interest, which means a higher payout.

What happens if you don't repay a gold loan?
Before you take a gold loan, it is vital to understand your repayment capacity. The lender has the right to auction your gold to recover the remaining loan amount in case of default.

What is the interest rate on gold loans?
Gold loan interest rates are lower than the interest offered on other loan options, such as loan against a credit card, loan against mutual funds, personal loan etc. This interest rate is usually 11% to 17%, depending on the lender, HDFC Bank offers gold loans at competitive interest rates and without any hidden charges.

Should you choose a bank or NBFC?
Today you can take a gold loan from NBFCs and banks across the country. While both offer a loan-to-value ratio of 75%, here's a quick guide on which one may be a better fit for you.

Gold loans from trusted banks like HDFC Bank tend to have competitive interest rate than NBFCs. Besides, HDFC Bank has a faster turnaround time; the loan is sanctioned in 45 minutes with minimal documentation and there are no hidden charges. And since prominent banks have better security, with a loan from a reputable bank you can rest assured that your jewellery is safe.

What charges or fees are involved?
Some of the additional fees involved include processing fee, repayment charges and valuation fee are amongst the charges that you will incur. Some lenders might not disclose these costs to look reasonable on the surface. However, banks, such as HDFC Bank, are known for offering gold loans through a completely transparent process without hidden charges.

If you are looking for a way to gather quick finances to tide over the current cash crunch, gold loans are the easiest sources to tap into right now. With gold rates on the rise, you can get a higher loan amount for your gold. So, click here to get your Gold Loan approved quickly and easily.

This is a partnered post.

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