Gold Loan Basics – Go Through This Before Opting for This Option
Gold Loan Basics
Gold Loan Basics! With increasing expenditures and low-income levels, it has become extremely tough for Indian consumers to survive in the declining economy.
If there is any medical case in your home, expenditures can rise by lakhs. In such scenarios, a gold loan from a Federal bank gold loan, Bank of Baroda, Axis Bank gold, etc. may be a prudent solution for you. This is because, a gold loan owing to its secured nature, is available at a lower gold loan interest rate than unsecured credit options.
For instance, the Federal bank gold loan interest rate is as low as 8.29 % p.a. onwards while the Federal bank personal loan interest rate ranges anywhere between 10.49 and 17.99 % p.a.
For you to understand better, here are answers to some of the common FAQs (frequently asked questions).
What jewelry can you pledge for a gold loan?
If you want a gold loan, you can directly pledge gold jewelry. According to the gold purity, your loan proceeds may be determined. Please remember that any gold form like bullion, coins, or bars may not be accepted by financial institutions for loans against gold.
How can a common individual get a gold loan?
All you must do is avail a gold and visit the bank. Once the lender evaluates the gold purity, they will tell you loan proceeds that you can avail of. RBI guidelines stringently state that the loan amount cannot be over 75 percent of your gold value.
Is your gold completely safe with a bank or NBFC?
There are zero parameters when you apply for a gold loan with an unlicensed NBFC or bank. Hence, it is extremely recommended to get a gold loan from a reliable lender. With your help, you do not require to worry about gold safety.
What are the required documents required for a gold loan?
You require the least proceeds of documents when placing an application for a gold loan. You need the least document when applying for the gold loan. Required documents required are one passport photo, identity proof like a driver’s license, passport, or Aadhaar card; and proof of address like a phone bill or electricity bill. In case you have no PAN card, you can submit form 60.
Also Check: Federal Bank Gold Loan Interest Rate
How much time taken to disburse a gold loan?
Gold loan is perhaps the fastest loan to avail. If you have all documents in place, you can get your loan proceeds disbursed in just a few hours.
What are the repayment options available for a gold loan?
A gold loan provides multiple convenient and easy repayment options. You can select any of them based on your convenience.
· Upfront interest constituent –
Here, you pay the whole interest at the beginning of your repayment tenure. The principal constituent must be paid towards the end.
· Bullet repayment –
Here, you must pay both i.e., principal, and interest constituent together, towards the end of your repayment tenure.
· Regular EMIs –
This is one of the most basic repayment options wherein you can repay the gold loan in form of monthly EMIs.
What happens if you do not repay the gold loan?
If you fail to pay your gold loan, ensure to note that NBFC or bank has every right to auction your gold so as to recover your remaining loan proceeds.
What are the fees and charges involved?
Fees and charges include processing charges, valuation fees, and late payment fees.
How do gold loans function?
A gold loan is among financial institutions’ profitable credit options as the banks are free from the worry of NPAs (non-performing assets). This is owing to the fact that ornament, which is availed as security or collateral stays with the lender even if you default on the payment of monthly installment repayment or EMI on the loan. Here’s how gold loan function –
· Quality check-up
When you as a customer approach a lender for a gold loan, the initial step a lender takes is to review the gold ornament’s purity that is being factored in as collateral along with determining gold jewelry value.
· KYC or know your customer
KYC or know your customer checks and norms as mentioned by the RBI or Reserve Bank of India are performed by the lender where the bank gets to know about the customer’s details like credit history, identity, the necessity for placing an application for a loan and other important details in granting the loan.
· Gold loan approval
Once the value and the quality of the jewelry are decided and the KYC process is done, the loan repayment tenures are agreed on by both the lenders and consumers. On the agreement, the loan gets approved, and the amount is credited to your account. This whole procedure may be completed in just a few hours.
What are the crucial features of a gold loan?
Rate of interest
The rate of interest on a gold loan differs based on the gold’s purity. The higher the gold purity, the higher would be the amount availed. The rate of interest differs between 8 percent per annum and 18 percent per annum in most public sectors. However, in the case of NBFCs, the interest rate may be as high as 24 percent per annum.
A gold loan is usually a short-term loan wherein the repayment tenure ranges between 6 months and 24 months. Thus, it is definitely a long-term repayment instrument.
Available to you even if you have a low score
As the gold jewelry is deposited with the lender as security or collateral against the loan, the lender is confident of processing the loan to you even if you have a lower score.
The weight of stones as well as their value are not counted Even while precious stones come with a high value, they generally are not factored in when computing your gold loan proceeds. Just the gold’s value and weight are factored in for determining your eligibility parameters and loan proceeds.