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When it comes to gold, it would not be wrong to say that for Indians it is an essential form of investment, from emotional and safety perspective. Once you buy the gold, it will be just like a dead investment, if it's locked in the locker, and is not helping in earning your money. So, it's important for you to make the most of it, especially when you are in the time of need.
Yes, you can effectively use this idle asset of yours in order to tide over your financial needs. Thus, whenever you find yourself in need of money, considering gold loans as an option is surely a wise move. Moreover, gold loans are also known as gold deposits provided by the banks or NBFCs by taking gold from you as a security.
However, one thing that needs to be mentioned here is the fact that the concept of taking gold loans is not new for the Indian market. Yes, this concept was there earlier, but only in the organized sectors, wherein the lenders used gold as a security, and then provide the loans. Now, in this modern ear everything has changed, and leading banks have entered into this space, by considering the fact that large numbers of Indians tend to have enough investment in gold.
Now, due to rise in gold prices, the concept of taking loan on gold has become quite popular and evident, people have started showing their interests in it. More to the point, gradually the loan amount that one can get by giving gold as a security has increased a lot, thus making it most convenient option to avail the loan.
Process You Need to Know about Gold Loan
In order to avail the gold loan, you need to give your jewellery to the lender, it might be a bank or NBFC. Then, the lender will start evaluating the purity of your jewellery. However, the evaluation charge is usually paid by the borrower. Moreover, after the complete evaluation, the next thing that comes into play is the paperwork for the mortgage. In order to complete the process, you need to submit the personal documents.
Secured Loan: Gold loan usually comes under secured loans because your gold being as a security. Thus, until and unless you are not sure about repay, avoid taking, else you will lose your gold.
Tenure: These types of loans can be availed usually for the tenure of 6-12 months. Thus, they are considered good for fulfilling the short- term monetary requirements.
No End Use Restrictions: You can take this loan for any purpose or reason for long duration.
Loan Amount: In many cases, the maximum value of the loan is not greater than 80% of the gold value.
Interest Rate: Rate of interest for gold loan is comparatively lower than avail the personal loan. The banks provide you lower interest rates as compared to other loans.
Repayment: You have the freedom to foreclose the loan at any time without even paying the penalty. Whereas, in case of skipping the EMIs, a penal interest of nearly around 2-4% will be charged by banks.
Quick Processing: Gold loans require minimum documentation, and the process is quite fast and quick as compared to other types of loans.
Documentation required to avail gold loan:
ID Proof such as Driving License / PAN Card / Form 60/61 / Passport Copy / Voter ID Card / Aadhaar Card / Ration Card. Any one document needs to be submitted Address Proof such as Driving License / Voter ID Card / Ration Card / Aadhaar Card / Passport Copy / registered lease agreement with not older than 3 months utility bills in the name of landlord (any one)
Once all your documents are verified, the lender will then provide you with the loan, which in most of the cases is up to maximum 80% of your gold value. Moreover, after you pay back the complete loan amount, the lender will give your jewellery back.
Below is the table showing rate of interest, tenure, processing fee and loan amount of the few banks that offer gold loan:
|Banks||Interest Rate (p.a)||Min-Max-Loan Amount (in Rs.)||Tenure||Processing Fee|
|ICICI Bank||6%-16.5%||10,000 to 15,00,000||6 months to12 months||1.0%|
|HDFC Bank||9.70%-15.65%||Minimum 50,000||NA||Upto 0.5%|
|Axis Bank||14.50% – 17.00%||25,001 to 20,00,000||NA|
|Muthoot Finance||14%-24% ||1,500 - No maximum limit||7 days-36 months||0.25%-1%|
|SBI ||11.10%||36 months|
(Updated on: 27 September,2016)