What is a gold loan?

Gold loan (also called loan against gold) is a secured loan taken by the borrower from a lender by pledging their gold articles (within a range of 18-24 carats) as collateral. The loan amount provided is a certain percentage of the gold, typically upto 80%, based on the current market value and quality of gold.

What is gold loan and how does it work?

For a Gold Loan, the bank takes your gold as collateral for the period of the loan. Banks charge an interest rate, and once you repay the entire loan, the bank returns your jewellery. Another essential thing you need to know about how Gold Loan works is the type of gold accepted. Most banks accept only gold jewellery.

Is it good to take loan on gold?

The loan amount you receive will be considered only against the actual gold in the asset. Since you will be pledging your precious gold as collateral, make sure the lender is reliable. Avoid getting a loan from jewelers or small shops, as they could be unregulated and may command unfavourable terms and conditions.

How do you get a gold loan?

You can get a gold Loan through either your bank or through a non-banking company that specializes in loans against gold. If you go to a bank like HDFC or ICICI, you will be asked to produce back-up documentation related to your ID and other personal details. The process, as advertised, can take up to 1 hour.

What happens if gold loan is not paid?

Auctioning Gold

The failure to repay (three consecutive payments or more) will ultimately lead to the gold being auctioned off by the bank or the financial institution since the gold has been pledged as collateral against the loan. It is now a non-performing asset and will be sold off for recovery.

Gold Loan - Interest Rate

How is gold loan repaid?

You must repay both the interest and the principal amount at the conclusion of the loan's term under a bullet repayment plan. You will not be responsible for any gold loan repayments during the loan term. You don't have to stick to any EMI schedule and can just pay off the loan in full when the term is up.

Who is eligible for gold loan?

Yes, anybody aged between 21 years and 70 years can avail of a gold loan. Unlike other loan types, secured or unsecured, applicants do not need to fulfil stringent eligibility requirements to avail of this loan.

What is the interest of gold loan?

The interest rates on gold loan, availed by pledging gold, are relatively lower than other types of loans and range between 7.35% to 29% p.a. Banks and other financial institutions in India offer gold loans, the loan amount for which ranges from Rs. 1500 to Rs. 1.5 crore.

What is better personal loan or gold loan?

For instance, a gold loan can be a better choice if you can repay the loan in a shorter duration and have a lower interest rate. On the other hand, a personal loan would be better for a longer tenure & higher loan amount. You must thus compare both loans depending on the requirement of your financial needs.

How much gold loan can I get?

*The market value of your gold is calculated by taking 30 days average gold rate of 22 carat gold | Purity of the gold is assumed at 22 carat. *You can avail a maximum loan of up to 75% of the market value of your gold depending on the quality of the gold.

How many types of gold loans are there?

The lender offers two types of gold loans – Gold Loan, and Realty Gold Loan. The repayment tenures for Gold Loan and Liquid Gold Loan are up to 36 months.

Does gold loan improve credit?

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.

How long does it take for gold loan?

If your application meets all the requirements, it takes just an hour for the loan amount to be disbursed. Q7. What is the repayment tenure of a gold loan? Depending upon who your lender is, a gold loan can be repaid in as less as 1 day to 48 part payment installments.

Does bank give interest on gold?

The government's Gold Monetisation Scheme (GMS) allows you to deposit your idle gold with a Reserve Bank of India (RBI) designated bank and earn interest on the same. This works similar to a bank fixed deposit. Depending on the tenure of the GMS one opts for, one can earn up to 2.5% interest per annum.

Does gold loan require income proof?

Documents required for a gold loan do not require individuals to submit their income proof or CIBIL score report for loan approval.

Can I foreclose gold loan?

Yes, you can always foreclose the loan at any point of time. Most lenders do not levy foreclosure charges for gold loans, but a few lenders charge between 2-4% of the outstanding principal amount.

How is interest calculated on a loan?

The rate of interest (R) on your loan is calculated per month. For example, If a person avails a loan of Rs 10,00,000 at an annual interest rate of 7.2% for a tenure of 120 months (10 years), then his EMI will be calculated as under: EMI= Rs 10,00,000 * 0.006 * (1 + 0.006)120 / ((1 + 0.006)120 - 1) = Rs 11,714.

Why is gold loan important for banks?

By taking gold loans, one can maintain liquidity in his finance, without selling off any asset or the gold itself. Gold works as a security for getting a required amount of finance from any bank. The most attractive part of these loans is that the loan is given for an amount which is more than 80% of the value.

Can bank auction gold loan?

In case of a default, the lender will hold the rights to auction the gold against which the loan was availed. The gold acts as a collateral in these cases and thus, the lender will be able to sell the same to cover up for the losses caused due to the non-payment of the gold loan.

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