Gold Loan Archives -

What are the Advantages and Disadvantages of Taking a Gold Loan?

Thu, 28 Apr 2022 12:47:31 +0000

The Buyt Desk

When in emergency, Gold loan is the quickest option as you will receive money in just a few hours. But it has a few drawbacks. Let us look into its pros and cons.

Gold loan is the Loan you get against your Gold. As Indians have gold ornaments lying idle in safe deposits, they can go for gold loans to generate some funds. It is considered as the quickest secured loan in an emergency situation. You need to vouch your gold ornaments or coins minted by banks with your loan lender to get immediate money. The loan offered is usually 75% of the vouched gold value. You will get back all your gold ornaments and coins you have pledged after complete repayment of the loan. Various banks and Non-Banking Financial Company (NBFC) provide gold loans. You can avail this facility by walking in to their bank/office or by registering through their websites or mobile app.

What is the Gold Loan process followed by Banks and NBFCs?

There are few steps that lenders follow prior to the disbursal of a gold loan-

Gold submission – Once you apply for a loan with the lender (online or offline), the lender collects the gold from you. You need to submit your gold articles that you are going to pledge to the concerned person. If it is an online application, lenders will come to your doorstep to collect articles and if offline application then you need to bring the gold to your lender.
Gold evaluation – The lender evaluates the overall value of your gold (excluding stones and beads in the ornament) as per the current market value. Based on the value of gold alone, the loan amount is decided. It can be anywhere between 75% – 85% of the total gold value.
Documentation process – You need to submit a few documents with your application form. This is hassle free as it needs very minimal documents like passport-sized photographs, identity proof and address proof.
Authentication and loan disbursal – The lender authenticates the documents submitted by you. Once approved the loan amount will be disbursed to your bank account.

What are the advantages of opting for a gold loan?

Faster processing – Gold loans neither have strict eligibility criteria nor heavy documentation. This makes it easy for lenders to disburse the loan amount in just a few hours.
Lower interest rate – Gold loans charge a lower rate of interest as compared to personal loans. And if you go for collateral security then the interest rate will be lowered further.
Flexibility in repayment – You can choose from any four repayment methods

EMI method – Monthly you pay a part of principal and interest.
Doing interest payments Quarterly/ Semi-yearly/ Yearly and paying the principal amount at the end of the tenure.
Doing upfront total interest payment and paying the principal amount at the end of the tenure.
Bullet repayment is where at the end of tenure you pay both principal and interest amount.

Income proof is not needed for approval of a loan.
The credit score is not needed for approval of the loan.
Zero processing fees – Most of the banks and NBFCs do not charge processing fees on gold loans and some charge a maximum of 1%.
No foreclosure charges – Banks and NBFCs don’t impose any pre-payment charges or charge 1% as prepayment penalty.

What are the disadvantages of opting for a gold loan?

Lower Loan-to-Value Ratio – This value is lesser for gold loans. Maximum of 90% of the value of the gold value is loan amount. And this is an ideal condition if you are a valued customer to banks else it can be as less as 65% or max 85%.
You can lose your gold – If you are unable to repay the loan amount with interest within the tenure, lenders are legally allowed to freeze your pledged gold and auction it. The excess amount after settling the outstanding gold loan amount is returned to you.
Impact on CIBIL score- When you miss your repayments, your CIBIL score will go down. If you are on time then your rating will go up on credit score.
Only for short tenures – The repayment of gold loans tenure is usually a year or maximum 3 years if it is a big amount.
The approved gold loan amount is directly proportional to the weight and purity of pledged gold – Gold below 18k of purity is not accepted even if it has precious stones like diamond.

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Want To Take A Gold Loan?

Thu, 20 Jan 2022 11:46:57 +0000

The Buyt Desk

Gold is considered to be a ‘friend of bad times’. Whenever a person buys gold he/she sees the yellow asset to be valuable in many ways. In India gold has been the easiest way to get a loan as well. Earlier moneylenders, goldsmiths or big shopkeepers used to give loans by pledging gold. But with the passage of time, the nature of gold loan has changed. Now many banks and non-banking financial companies (NBFCs) are giving loans against gold. A gold loan or loan against gold is a secured loan as the borrower keeps the gold as the collateral with the lender. If you are seeking a gold loan here is the whole process-

1. Selection of Bank/ Finance Company

First and foremost you need to finalise the bank or the finance company from where you will take a loan. While deciding upon the institution ensure that they are reputed and a known company or bank. After that you should look for their branches and locate a branch close to your home. Always choose the nearest branch of the bank or finance company as this will make your commute easy.

2. Purity Of Gold

You can get a loan against any form of gold , it could be jewellery, coins or gold bars but the lender will check the gold on the basis of weight and purity. The bank or the organisation giving you the loan will assess the purity of the gold. This is an important step because banks/institutions give loans only on gold of 18 carat and above purity. Loans on gold less than 18 carats are not allowed.Many institutions do not accept coins above 50 grams.Gold ranging from 18K to 24K can only be kept as security for getting a loan.

3. Loan to Valu Ratio (LTV)

Loan to value or LTV is the amount of loan the customer will have as against the value of gold. Based on the purity of the gold, the lender will decide the size of the loan. Usually banks and financial institutions give loans up to 75 percent of the value of gold.During pandemic, Reserve Bank of India had raised this loan to value(LTV) ratio to 90% as well.

4. Minimum Documentation

To apply for a gold loan, you will need an Aadhar card or PAN as an identity proof. Ration card, electricity or telephone bill can be given for address proof. You will have to submit your photographs and some financial institution may ask for income proof. Despite a low CIBIL/ credit score you can get a gold loan as the borrower has to keep gold as the collateral against the loan.

5. Interest Of Gold Loan

The interest on gold loan will vary somewhere between 8 to 18% per annum in public sector banks and private players can charge upto 24% per annum interest. Lenders also charge a 1-3% processing fee for the process. Generally, the lending institutions charge interest every month. At the end of the loan tenure, the principal amount is deposited in a lump sum. Some institutions also offer gold loans on EMI.

6. Tenure of Gold Loan

Gold loans are short term loans. The tenure can vary from one institution to another. The tenure of a gold loan could range from a 3 month to 2 year time period.

7. Loan Amount

The amount of Gold Loan approved for you is directly transferred to your account. Some finance companies give cash amounts up to less than two lakh rupees. The amount above that is directly transferred to the account through NEFT.

8. Gold Auction

Financial institutions impose a penalty for non-payment of interest on time. If interest is not paid for 14 months then they can auction your gold. Before taking such a drastic step, notice is issued to the borrower.

If you are considering taking a gold loan, we hope we have helped you in making an informed decision.

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How To Take a Gold Loan?

Wed, 25 Aug 2021 05:57:26 +0000

The Buyt Desk

If you are facing a financial crisis then gold can come to your rescue. The gold loan can bail you out. The demand for this loan has risen magnificently in the time of pandemics. The economic uncertainty, along with slow momentum, is the main reason for this drift.

Gold loans are very easy to obtain and repay. It is a secured loan where the borrower gets a loan by keeping gold as collateral with a bank or Non-banking Financial Company (NBFC). The lender gives loans valuing gold based on floating market value. After borrowers repay the lent amount along with interest, they get their gold back.

The fund received from loans could be used for meeting any financial requirements. So, if you are thinking of taking a gold loan, here are a few things you must know about –

What are the Requisites to Take a Gold Loan?

Gold loan is one of the simplest to obtain and requires minimal paperwork. Anyone above 18 years, having gold in any form, jewellery, bar, coins, can apply for this loan. The borrower has to take the physical gold to a lender. The lender checks the gold purity and offers prices according to prevailing gold value. According to the RBI guideline, the lender can lend up to 90% of the gold value.

The lender only charges a processing fee according to their policy. For the loan processing, the lender requires a few documents like identity proof and address proof. With all documents in place, the bank or NBFC disburses the loan within 15-30 minutes over the counter.

Know the Benefits Of Gold Loan?

If you are considering taking a gold loan, you must know its benefits.

Instant Approval – The documentation and processing time with the gold loan is minimal, thus quickly available. The borrower pledges the gold to the lender and gets money transferred in the account or cash in return.

Lesser Interest Rate – Gold loan is not affected by borrowers credit score. Even with a poor credit score, one gets the loan at the same interest rate. Furthermore, the interest rate of gold loans is much cheaper than the other options. The banks and NBFC are providing the loan with a lower interest rate. They are promoting various enticing schemes as well.

Loan Value – The loan amount depends on the amount of gold the borrower pledges with the lender. The gold prices rise during crises, as witnessed in the pandemic. So the borrower gets a handsome amount from the institution that comfortably fulfills their sudden financial requirements.

Easy Repayment Terms – The lenders have been promoting gold loans with enticing repayment options and interest rates. Though the repayment terms vary according to the loan amount, in general, it comes with one year tenure. Some lenders provide it for three or more years and simultaneously promote borrowers to pay monthly EMIs.

What are the Risks Involved With Gold Loan?

Gold loans are a secured loan, so do not involve risk. If you pay off the amount within time, you lose nothing except the interest, which is lower than the personal loan, credit card, and other options.

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