A gold loan is a secured personal loan provided in exchange for a gold mortgage. If you have gold jewelry, ornaments, or bullion, you can mortgage them with a lender and get a loan based on the total amount of the mortgaged gold. Your capital assets, such as gold, serve as the collateral for loans. The amount given for each gram of pledged gold is known as the “gold loan per gram rate.”
Key characteristics of a gold loan
Here are some of the critical characteristics of gold loan online:
- You can use the loan for any form of financial necessity because it is multipurpose.
- You can apply for the loan online and get money as soon as possible.
- The lender assesses the mortgaged gold’s worth. The loan amount is then calculated using this appraisal.
- Because your loan is secured by gold, which the lender can sell to recover the outstanding loan balance in the event of a default, the interest rates are lower.
- Several lenders also provide free insurance coverage on the gold held as a mortgage to secure your valuables.
- Until the loan is repaid, the lender keeps the gold in safekeeping. The gold pledged as collateral is returned to the borrower after the loan account is terminated.
How is a loan against gold obtained?
You can mortgage your gold assets and take out a loan against them if you need money for either personal or professional purposes. Here’s how you can do it to that effect:
- Examine your eligibility requirements.
To determine whether you qualify for a gold loan, you must decide whether or not you match the lender’s requirements. The fundamental requirements are the same. However, the eligibility criteria vary amongst lenders. They consist of the following:
Age: You must be at least 18 years of age. Most lenders only approve loans for borrowers who are at least 23 years old.
Revenue: You should be able to rely on a reliable source of monthly income. The lowest income threshold differs amongst lenders.
Credit rating: To qualify for the gold loan, you must have a high credit rating. Scores between 700 and above are possible.
Check the lender’s eligibility requirements before applying for a gold loan. The loan will only be approved if you meet the requirements.
Keep your papers close at hand.
Establishing and authenticating your age, identity, and income with your documents would be necessary. Lenders typically require the following paperwork to process loans:
- Identity documentation includes a passport, PAN card, Aadhaar card, voter ID card, etc.
- Age documentation includes passports, birth certificates, PAN cards, and Aadhaar cards.
- Utility bills, rental agreements, title documents, and an Aadhaar card are examples of address proof.
- 3-6 months’ worth of bank statements
- Income documentation includes a pay stub, Form 16, an audited financial statement, an IT return, etc.
- Keep these papers close so you may attach them to your loan application and expedite the lending process.
Compare lenders before selecting one.
Numerous banks, non-banking financial institutions (NBFCs), and other lenders provide gold loans. Check out the lenders that are offered and evaluate their interest rates. Compare the loan amount the lender is willing to approve as well. For a cheap loan, pick a lender with the lowest interest rates. Additionally, look for a loan that provides the money you require.
Obtain a gold appraisal from the lender.
You must have the gold valued to determine the maximum loan amount you are eligible for after comparing lenders and narrowing your list of choices. Therefore, define the number of your gold assets before having them appraised. Remember that the quality and weight of the gold you pledge will determine its value. Precious and semi-precious stones are not considered when evaluating gold jewelry. Therefore, the allowable loan amount would be more the better the purity and heavier the weight.
- Deposit the processing fee.
When you apply for the loan, you must pay a processing charge. This charge is paid to process your loan application and is not refundable. The cost is determined by the size of your loan and must be paid in full when the loan application is turned in.
Once the processes are finished, the loan will be approved, and the lender will verify your application. The money will be transferred to the designated bank account, where you can use it to pay your bills.
The loan is typically repaid over the chosen period through EMIs. You can choose an appropriate loan repayment period with manageable EMIs.
What to keep in mind while applying for a gold loan?
Although a gold loan online is simple to obtain, there are a few considerations you should make before applying for one:
There are several ways to pay back the loan, with EMIs being the most common. So, look over the lender’s available repayment options and pick one that works. You would incur additional interest charges and processing fee for gold loan, and your credit score would also be negatively impacted if you missed a payment. Numerous lenders provide prepayment options enabling you to repay the loan faster.
Gold’s value and hedging capabilities may also be used to secure loans. Other metals can’t be described in the same way. With lower interest rates than personal loans, it can provide you with money at a crucial moment. These days, they are obtaining a gold loan with only a single click and a few requirements. Contact your financial advisor before taking out any loans.