Foreclosure is a term that represents an early payment of the loan taken. When a borrower repays the amount of gold loan to the lender in exchange for the gold pledged by them is called a foreclosure. In case of foreclosure or early payment, banks ask for some extra charges to be paid by the borrower. This is because banks incur losses of future potential interests which would have been received by the bank if the payment by the borrower was not made.
It is a market practice to charge between 1 to 3% as the foreclosure charges of the outstanding balance of the gold loan. Some banks charge as low as 1%. One such bank is Syndicate Bank which offers its Karur Vysya Bank Gold Loan. It charges a reasonable 1% foreclosure charge if payment is made within the first 3 months by the customer.
To avail for such a gold loan, the following eligibility criteria need to be filled-
The customer applying for a gold loan has to be an Indian resident.
There must be a Self-occupied residential house registered in the name of the customer who is applying for such a gold loan
Only the gold ranging from 18 carats to 22 carats can be pledged.
The customer applying for a gold loan has to be 18 years or above.
Along with fulfilling the above eligibility criteria following documents are also needed to be submitted for availing a gold loan-
Proof of residence such as utility bills of home/ Aadhar card/ voters ID
Proof of Identities such as Aadhar Card/ Voters ID/ PAN card or driving license
Some other advantages of applying for a gold loan and not for any other loans are-
1. Low-interest rates charged in comparison with other types of loans
2. Fast disbursement of the loan within a few hours
3. Secured way of raising finance. The gold of the borrower is taken due care of by the lender
4. Minimal documentation
5. Customers can apply for a gold loan via both online and offline modes.
6. An individual who even has a low CIBIL score can apply for a gold loan easily. A gold loan is a completely secured loan, and hence banks are not concerned about an individual’s CIBIL score. If the customer defaults on repayment, the Bank can sell the gold in the open market and recover the amount of loss incurred.
With these advantages, banks keep on offering their existing customers additional advantages from time to time. After knowing the Gold Loan Per Gram criteria and verifying all the documents the borrower has to visit a bank branch at least once even if he or she applied for a gold loan through online mode. This is to deposit the gold with the bank.
Other than this every step in the process of a gold loan can be done online.
After the gold is deposited with the bank the lender makes sure that the quality of the gold is good. The Lender whether in-house or from any outside source verifies the quality of the gold. An amount equivalent to 80% of the value of the gold so pledged with the lender has been sanctioned. Because of clutter in the gold loan market, many lenders are there who are offering gold loans at competitive rates. There is a need for a better understanding on the part of customers about the products offered in the financial market of a gold loan.
Conclusion:
Even if a customer falls under the eligibility criteria of any bank and the financial institution offering a gold loan, there must be a proper and careful analysis that has to be done by the customer. Various lenders and their products and interest rates should be compared and then only a decision should be made by a customer as to where to apply for a gold loan.
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