Gold loans are secured loan types where the borrower pledges their gold ornaments as collateral with the lending institutions, and in return, the institutions provide them with instant funds.
It is the most preferred and convenient loan to avail in need of urgent liquidity. Every bank and non-banking financial companies have their own terms and conditions when it comes to lending a loan. Some may have a tenure of 3-12 months while the other may have it ranging from 3 months - 3 years.
It all depends on the institution the borrower is lending loan from.
Speaking of terms and conditions, let us see a few terms and conditions applied commonly:
The tenure can be selected as per your choice from 3/6/9 and 12 months.
The gold loan interest rate is fixed and is mentioned on the sanction letter provided at the time of the disbursement of loan. It is to be paid on due date as mentioned herein. Interest is charged on a daily basis. Failure of not paying interest may lead to appropriate action by the bank to recover the dues, which includes an auction of the gold pledged.
Any default in the payment of installment will lead to the payment of additional charges as applicable for temporary overdraft.
There are fixed charges other than the interest rates which will be applicable on the upfront and will be deducted from the loan amount offered. The charges involve:
Processing charges
Storage charges
Valuation charges (some banks or NBFCs have in branch valuation officer so this may come off from the charges)
Front ended interest
Insurance premium
Stamp duty
A net amount in INR after the deduction of all the applicable interests and charges will be disbursed by the bank.
The mode of repayment can be of your choice from the option: paying it in EMIs, both the interest rate and principal amount or paying the interest rate monthly and the principal amount at the end of the tenure.
Banks are at liberty to verify the quality and quantity of gold pledged, from time to time. The bank will give notice in 7 days prior to the inspection done and you shall be present. If you are not present on the day of inspection then it shall be done in your absence and in case of any deduction in quality or quantity of gold, you shall be liable to pay the loan amount in advance with additional charges.
Above were a few terms and conditions which are applicable in almost all the banks and NBFCs. They might add a few terms according to their needs.
Conclusion:
Terms and conditions are something that is applied and taken into consideration according to the bank the borrower applied for the gold loan in. there can be various terms and there can be limited countable on fingers. One should always be aware of the terms and conditions on a serious note so that there is no default and fraud from both ends.
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