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Gold is considered a safe investment in India. Indians love investing in gold as they can sell it to get cash in difficult times. Some people attach emotional value to gold and thus prefer to get a loan on it.In this blog, you will learn all about a gold loan, interest rates, charges, tenure, eligibility, and required documents.
Key Highlights
- A gold loan is a secured loan where you pledge gold for cash.
- You can get a loan on gold from banks, non-banking financial institutions, fintech companies, or your neighbourhood jeweller.
- A gold loan is quickly and easily available at lower interest rates.
- It offers flexible repayment terms to suit your financial needs.
What Is a Gold Loan?
A gold loan is a secured loan in which you can borrow cash while keeping your gold as a pledge or collateral. The loan amount is decided based on the current value of your gold.It offers a simple and fast method of meeting your financial needs. Due to the collateral, it requires minimal documentation and is available at lower interest ratesYou can get a gold loan in India through various public and private banks, non-banking financial corporations(NBFCs), fintech platforms, and neighbourhood jewellers
How Does Gold Loan Work?
The gold loan works like any other secured loan
- You contact a lender with the gold you want to pledge and the required documents
- The lender checks the gold and the papers and assesses the gold’s value
- If you agree with the loan amount and other terms and conditions, the lender approves the loan, takes possession of the gold, and disburses the money
- You repay the principal and interest according to the loan terms
- Upon complete repayment, you receive your gold back.
Gold Loan: Interest Rates, Charges, and Tenure
Due to the collateral involved, a loan on gold can be obtained at lower interest rates. The interest rate depends on factors such as the lender's nature and loan term. For example, banks charge lower interest than NBFCs. The interest rate may vary from 7 to 29% annually, depending on the lender.Similarly, the loan tenure varies with lenders. It is typically for three months to several years. However, some lenders offer the option of loan extension if needed.You may need to pay some additional charges for a loan on gold compared to a personal loan. For example, gold valuation charges, administration charges, documentation fees, etc. Also read : Gold Loan VS Personal Loan: Know Before You Choose
Eligibility for Availing of a Gold Loan
To be eligible to avail of a loan on gold, you must be:
- An Indian citizen aged between 21 to 70 years.
- The gold must have a purity of 18-24 karat.
- You have the purchase documents for the gold you plan to pledge
Documents Required to Apply for a Gold Loan
To get a loan on gold, you require the following documents:
- Identity Proof: Aadhar card/ PAN (permanent account number) card / Passport/ Voter ID/ Driving licence.
- Address Proof: Aadhar card/ Passport/ Voter ID/ Driving licence/ Ration card/ Utility bills.
- Recent passport-size photographs.
- Ownership Proof: Invoice/ Purchase Receipt of the gold item to be pledged.
- Bank Account details.
Benefits of a Gold Loan
It offers certain benefits over a personal loan:
- Lower Interest Rates: Due to the secured nature, it offers lower interest rates, reducing your cost of borrowing.
- Fast Disbursal: It is one of the quickest loans, making it optimal in emergencies like medical issues, education, etc.
- No Credit Checks Required: You do not need a good CIBIL score to get a loan on gold as long as you possess the gold.
- Repayment Flexibility: You can choose a flexible repayment plan for your loan by returning the total loan amount as lumpsum or through equated monthly instalments (EMIs).
Also Read : What are the Tax Benefits on Gold Loan?
Gold Loans: A Quick Solution to Your Financial Problems
A gold loan can be a boon for you if you need financial assistance. Loan against gold meaning is simple. You pledge your gold to a lender who provides you money at predetermined terms and conditions. You can redeem your gold upon fully repaying the principal and the interest.In need of a loan but do not have collateral? Connect with Aditya Birla Capital to get affordable personal loans
FAQS - FREQUENTLY ASKED QUESTIONS
What is a gold loan in India?
It is a secured loan where your gold acts as collateral. It is a convenient option for a fast, hassle-free loan if you own gold assets.
How gold loan work?
It works like any other secured loan. You deposit your gold as collateral with a lender. The lender evaluates its value and approves your loan amount at a nominal interest rate. You can repay the principal and interest on the pre-agreed terms and get your gold back.
Why is gold considered a secured loan?
Gold is considered a secured loan for a lender when you deposit it with them. This gold guarantees that the lender can recover his money by selling it if you fail to repay the principal and interest.
What can be the maximum value of a gold loan?
According to the Reserve Bank of India, the loan amount allowed may not exceed 75% of the gold's current market value.
Is gold loan safe or not?
Loans on gold are safe if you get them from registered lenders and pay your dues on time.
How can I use the money received from a gold loan?
You can use the money from a loan on gold for any purpose, such as medical emergencies, education, home renovation, debt consolidation, travel, or weddings.
What are the benefits of a gold loan?
The key benefits of a gold loan are its quick disbursement, lower interest rates, and repayment flexibility.
What is the eligibility for a gold loan?
To be eligible for a loan on your gold, you must be an Indian citizen aged 18 to 70 and own 18 to 24 karat gold.
Do I need a good CIBIL score to get a gold loan?
A good CIBIL score is optional for a gold loan as your pledged gold guarantees the loan amount.
Which is better: a gold loan or a personal loan?
Choosing between a gold and a personal loan depends upon your requirements. If you own gold that you can pledge for some time, you can easily avail of a loan on gold at lower interest rates.
A personal loan may be preferred if you do not have collateral.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
