WHAT IS A GOLD LOAN?
Gold loan is a type of secured loan which requires limited paperwork with ease in getting quick loan approvals from banks and financial institutes without even checking the creditworthiness of the borrower. Once, you need to compare the option and decide which option suits more to your credibility.
While taking a gold loan, keep these things in mind:
Lender:
The gold loan is both offered by banks as well as NBFCs but there is a slighter difference between banks and NBFCs and that is loans against gold offered by banks provide better interest rates as compared to NBFCs providing a higher rate of interest. Another difference between banks and NBFCs is that banks offer loans faster than NBFCs as they value metal in the house.
Purity and Gold bars:
It is important to note that no financial institutes or banks evaluate the purity of the yellow metal as a minimum of 18 carats. However, it is slightly easier to raise loans by offering gold bars because many lenders don’t lend against gold bars. So one can pledge gold jewelry and coins for getting loans. Even though, for purity, there are some restrictions on the weight made by the bank for the approval of the loan.
Repayment EMIs:
There are many ways to pay for a gold loan. Either you can repay in equated amounts installments i.e EMI or one-time payment at the end. Although some NBC’S or private finance institutes deduct the interest amount before disbursing the loan amount.
Non-payment:
The borrowers need to keep in mind that if they are not able to repay the loan amount on time, then the bank or the other financing institutes sell their pledged gold. In case if there is a downfall in the price of gold then the lender can ask the borrower to add on the pledged gold as it is the lender would maintain the loan to value ratio which means the value of gold should be more than the amount lent to a borrower.
Gold loan myths you need to avoid:
There are many myths which usually people listen to in the market. When it comes to gold loans, there are no chances that a bank or NBFCs will lead to fraud cases with your ornaments. Usually, an individual as a borrower should hold trusted sources for applying for such loans so that the quality and security of their asset can not be compromised. Most people think that only jewelers offer such kinds of loans but it is not true, as banks and NBFCs also offer gold loans. It is important to go with options that are licensed because that will give surety and security that your gold is in safe hands. And when you repay the loan, you will get the exact gold back in the same state as it was given.
Gold loan per gram:
The gold loan is given on the purity of the gold that is deposited for getting loans approved. The gold loan depends on the quality and how many carats of gold are deposited. For example, the Indian overseas Bank gold loan provides 8.5% gold loan interest rates. and approval of the loan is based on the evaluation of the yellow metal. Indian Overseas Bank gold loans give lower rates.
CONCLUSION:
Therefore gold loan is a secured loan that brings banks at lower risk while providing loans to borrowers on behalf of it. Gold loan per gram given by the banks and NBFCs differs and therefore an individual should evaluate the interest rates of different branches and private institutes for getting more benefits.
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