Gold Loan is a secured loan which is given by banks and other lending organisations for education, wedding, travel, business, etc., it's a versatile loan. The gold loan can be availed for a tenure of up to 36 months. Borrowers can reimburse the loan through EMIs, bullet repayments or overdraft.
Loan amount on gold is conditioned on the worth of gold and Loan-to-value ratio, which is verified by the banks. The higher the gold worth and loan-to-value ratio, the greater the loan amount. For instance, Mr X needs to take a loan against the gold worth ₹ 2 Lakh. Bank A offers 90% of the loan to value ratio (LTV), while bank B offers 80% of LTV. So, X can get a loan of Rs.1.80 Lakh from Bank A or 1.60 Lakh from Bank B, respectively. LTV ratio differs from bank to bank.
The amount of gold loan that a person can get on a gold object will diverge from lender to lender. The lender usually grants gold loans within Rs 20,000 and Rs 20 lakh. While it enables Muthoot Finance gold loan beginning from a minimum amount of Rs 1,500 with no maximum limit. The minimum amount for Indian Bank gold loan is based on the valuation of the Jewel being guaranteed.
Gold loan interest rate are lower than the interest allowed on other loan options, such as loan against a credit card, loan against mutual funds, personal loan etc. This interest rate is usually 11% to 17%, depending on the lender. The interest rate generally for the borrowing individuals and entities on a gold loan is 7% onwards based on the loan amount. All individual farmers can apply for the gold loan at any bank or non-banking financial company.
Disadvantage: A gold loan is conditioned on the worth of gold and LTV ratio. So, it limits the amount of loan one wants to raise. Moreover, if you miss paying the loan, you may lose your precious metal.
Advantage: As the gold loan disbursal rate is quite high, it can be used in the form of an emergency fund and another benefit of opting a gold loan is the interest charged on gold loans is low. Moreover, you can get the gold loan irrespective of your earnings and credit history.
Documents: Along with one passport photograph, you require to submit any one of your identity proofs (passport, driver's license, Aadhaar card) and address proof (electricity bills, phone bills). If you don't have a PAN card, you can present Form 60.
Conclusion: If you are looking for a way to assemble quick finances to tide over the prevailing cash crunch, gold loans are the most natural sources to tap into right now.
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