It is possible to borrow in many different ways. Typically, unsecured loans like personal loans or credit card debt, and secured loans such as home mortgages, overdrafts, and secured loans against your assets, are your options. Those affected by the Coronavirus crisis are now borrowing against assets such as gold. A loan against an asset is typically easier to obtain than a loan against cash. Credit and income restrictions are reduced when collateral is available. 

Apart from shielding you from uncertainty and aiding you in fighting inflation, yellow metal also helps you access credit. The Coronavirus crisis has forced many households to use their assets. There has been a consistent demand for gold, and numerous gold investors have financed loans to handle liquidity woes. 

Any urgent liquidity requirements can be met with gold articles mortgaged by banks and NBFCs.   

Gold loans have their loan-to-value (LTV) ratio increased recently by the Reserve Bank of India. For gold, the LTV rate – your borrowing capacity – used to be 75%. A gold loan LTV ratio of 90% has been increased by the central bank until April 1, 2021. Gold loans now allow households to borrow more money on their gold. Covid-19 has caused financial hardships due to the move. 

The following information can be helpful if you’re looking for a gold loan.

Gold loans: what are they?

When a lender gives a borrower a loan, he or she is borrowing gold (of a carat value between 18-24) as collateral. A person’s loan amount is also determined by the market value and quality of the yellow metal and a certain percentage of the loan.

The maximum loan-to-value ratio for gold loans tends to be 75 percent of the market price of the metal.

Among the benefits of gold loans are getting loans at low-interest rates, quick and hassle-free loan disbursal, and flexibility of use. Many banks offer the lowest rates, and thus hassle-free approval of loans makes it very easier for you to take the loan. 

Gold loans require different documents depending on the lender. Aadhaar cards, PAN cards, voter ID cards, among others, provide proof of identity, while photographs and proof of address are also required. 

How does the Gold Loan EMI Calculator Work?

Gold Loan EMI Calculators have been designed to make the process of calculating gold loan EMIs based on the interest rates charged by the lenders and selected tenures.. All you need to do is follow the steps given below-

• Choose the amount of the loan you would like to take out.
• Calculate the interest rate
• Finally, include the repayment term

That’s all there is to it! You can obtain an EMI for your gold loan by using our calculator.

You will be able to maintain a better financial plan by using the gold loan EMI calculator.

Gold loans are a short term facility, normally for a period of up to 12 months. It has to be repaid after that period. You can approach your bank to extend the period of the loan for another 1 year based on mutually agreeable terms and conditions. Make sure that you are in a position to repay the loan within the time limit. Gold loans are good in case of emergencies but there is a major downside. In case you are not able to pay back on time then your gold will be auctioned and normally you end up getting an unfavourable rate for your gold in these circumstances.

Does credibility of the lender matter? It does because you are keeping your gold there. The lender will feel secure as he has the gold as security in case if the borrower does not pay back. However, the value of your gold is higher than the loan value and you don’t have any guarantee that you will get the gold back. Before you approach a lender do background checks and know the safety measures taken by the lender to safeguard your assets. Ultimately the gold that you pledge should be in safe hands. So choose a reputed bank regulated by the RBI where you can actually rest assured.

Last, but not the least, clearly understand the repayment structure of the gold loan. There are various options. Gold loans normally have flexible repayment structure as compared to any other loans. In every bank, the repayment structure of gold loans might differ. In most banks, you can opt for paying just the interest amount through the period and at the end of the tenure, you can pay the principal amount and take back your gold. This is the preferred model. But some banks also insist that you pay part of your principal each month.

Getting a gold loan instead of a personal loan, when you are in urgent need of money, will be beneficial to maintain a positive CIBIL score. Undoubtedly, it is one of the ideal options to increase the credit score as well. The main difference between a gold loan and a personal loan is that a gold loan is a secured loan and the personal loan is an unsecured one

Documentation

Online loan applications are accepted. Gold loans can only be obtained from specific branches. A photograph, PAN number, identification proof, and proof of address are required with the application.

Deposit of gold

Upon submitting an application, the customer and the bank sign a gold loan agreement. A bank then disburses a loan based on the gold that was appraised. 

Charges

Gold valuation fees are charged as well as loan processing fees.

Default

Defaulting banks and financial institutions can reclaim money owed to them by selling gold that has been hypothecated.

Points to Note

1. Gold loans can be disbursed within a day of application.
2. The customer’s gold is stored safely in a vault in a strong room, and after repayment of the loan, the customer receives it in the same condition as when it was received. 

Conclusion:

Indian citizens who own gold (jewellery, bars, coins) between the ages of 18 and 70 can take out gold loans. Applicants need to ensure they check the eligibility criteria of each financial institution in advance, as they may differ.

 

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