Gold Loans, requisitioning monetary amounts in exchange for gold that is kept as collateral security deposits to the banking institutions is undoubtedly one of the most secure sources of finance in the economy thereby consolidating the financial stability of the business environment and functioning. Gold Loans stabilize lending options for borrowers.
Application for a Gold Loan is as structured as the application process for a home loan as the entire procedure is divided and separated into different steps and criteria which are to be fulfilled by the borrower. Firstly, the borrower must apply for taking the gold loan by filling out the details of the application form where the borrower must put in details regarding the personal details of the borrower, income details of the borrower along with the salary statements which would mention the amount of income that forms an important correlation between the borrower and the lending capacity of the banking institution.
However, while lending monetary amounts from the banking institution by pledging a certain percentage of the gold as a security deposit the borrower must keep in mind that a detailed account of the following information must be maintained by the borrower so that the process can be maintained efficiently-
Rate of Interest- The first determinant determining the gold loan capability is the gold loan interest rate. The interest rate on the gold loan refers to the fixed percentage which is levied on the gold loans which are payable monthly by the borrower thereby consolidating a business relationship between the banking institution and the borrower.
A lower rate of interest encourages more borrowers to take a loan from the banking institutions while higher rates of interest do not allow the borrowers to take loans from the banks as it discourages the lending propensity of the borrower since deflationary conditions persist in the economy.
Credit Capacity of the Lender- Through the facility of Gold Loan per gram calculation and measure the lending capacity of the borrower is determined. The most advanced banking institutions possess the mechanism and the instruments like the Gold Loan Calculator where the Gold Loan per gram is calculated whereby the value of the gold per gram is calculated and the monetary amount is provided by the banking institution to the borrower. The valuation of gold loans is one of the most important criteria determining the flow of credit in the economy.
Calculation of Loan Amount- Another important criterion determining the lending tendency of the borrower is the calculation process of the loan amount. The calculation process differs from one private commercial banking institution to another. For example- the loan amount is segregated according to the loan acceptance tendency of the borrowers.
A borrower with an income capacity of 20,000 per month can take a gold loan of 10 lac while a borrower with a monthly income of 50,000 can take a gold loan of 20 lac. Bajaj Finance Gold Loan facility differentiates borrowers based on their income capacity as possessing different lending criteria for borrowers belonging to different income categories thereby ensuring that the borrowers can repay the credit taken within the required time.
Tenure of Repayment of Gold Loan- The final consideration before applying for a gold loan is to check the tenure of repaying the gold loan. The tenure of repayment for a gold loan varies from 20 years to 30 years depending upon the feasibility of the borrower.
However, the repayment period of the borrower regarding the conclusive instalment amount and the subsequent interest amount along with it is to be paid within 8-10 years so that the CIBIL Score of the borrower can be maintained. For example- Bajaj Finance Gold Loan offers various facilities like zero processing fees so that more borrowers are encouraged to take the loan facility from the banking institution.
In conclusion, gold loans have instituted their position as one of the most important sources of long-term finance in the economy.
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