What is a Gold Loan?
The Gold Loan is a product that helps you to obtain a personal loan by securing your gold ornaments or jewelry. The loan amount is determined by the amount pledged when gold is used as collateral. Education, a holiday, or a medical emergency are all examples of personal finance criteria. The utilization of funds is not a factor in deciding whether or not funds are sanctioned.
How does the Gold Loan work?
The maximum loan amount is determined by the value of the gold pledged. The Reserve Bank of India prohibits banks from approving loans that exceed 75% of the gold value pledged (i.e. Loan-to-value ratio). In general, absolute amounts will range from INR1,500 to INR1 crore, depending on the bank’s eligibility criteria. The RBI has also developed guidelines to standardize a bank's valuation methodology when valuing pledged gold.
For Canara bank gold loan per gram, the average closing price of 22-carat gold for the previous 30 days, as recorded by the India Bullion and Jewellers Association Ltd, is used to calculate the value (or the historical spot Gold price data publicly disseminated by a commodity exchange regulated by the Forward Markets Commission). The pledged volume in grams should be changed pro-rata if the purity is less than 22 carats. The maximum duration for the repayment of the loan cannot exceed more than 12 months.
Repayment can be categorized through:
Monthly Instalments Equated (EMIs).
Interest is charged upfront, with the balance repaid at the end of the loan term.
Interest is charged annually, with the principal repaid at the end of the loan term.
An EMI plan is a monthly payment plan that spreads out the total principal and interest due evenly over the loan term.
What is Gold Loan Interest Rate?
The EMI is measured using the principal to be lent, the relevant interest rate, and the loan period, just as it is for a vehicle, house, and education loans. The banks decide the interest rate.
Are there any other charges?
For Gold Loans, there is normally a processing fee (generally not more than 1% of the loan amount), late payment fees, valuation fees (to determine the value of the underlying collateral), and so on. You can get a sense of the available interest rates and processing fees by looking at an online loan marketplace. They are often expressed in annualized form. The gold rates vary from city to city due to different reasons. This means the possibility is there that the loan amount can be more valued in Patna than Ranchi, because of the difference in the gold rates in Ranchi and gold rates in Patna.
Points to keep in mind while taking gold loan:
In most cases, the lower the interest rate, the shorter the loan duration.
In the majority of cases, a pre-payment fee is waived.
Gold Loan is a great choice for fast, low-documentation financing.
In most cases, the lending company would not lend the full value of the gold.
A Gold Loan is one of the few items where the credit score of the borrower isn't taken into account. However, timely repayment of a Gold Loan helps to improve one's credit score.
Conclusion:
Just 18 to 22 karat gold ornaments and bank minted coins (24 karat) up to 50 gms per customer are acceptable for funding. If you're taking out a gold loan worth more than Rs.25 lakhs, you'll need to send an ITR. If the annual income exceeds Rs.5 lakhs, a PAN is required by regulatory guidelines. The customer does not have to be a current bank customer.
It is important to understand that while taking a gold loan, the customer must have a savings/current account with the respected bank account from where you take a loan. This will not only help a customer to enjoy the bank’s services but provide convenience in repaying the loan.
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