Gold has long been a symbol of wealth and security in India. A loan against gold, where individuals use their gold jewellery or coins as collateral, offers a swift and convenient way to access funds during emergencies. This financial solution is particularly appealing because it allows one to unlock the value of their gold without having to sell it. However, before obtaining such a loan, one must meet specific requirements to ensure eligibility and smooth processing.
Understanding loan against gold
A loan against gold is a secured
loan provided by banks or non-banking financial companies (NBFCs) such as Bajaj
Finance, wherein borrowers pledge their gold assets to access funds. The loan
amount typically depends on the value and purity of the gold. For instance, if
you have 22-carat gold, the 22-carat gold loan rate will determine how much money you
can borrow against it.
Why choose a loan against gold?
●
Quick processing: Since it's a secured loan with
gold as collateral, approval is generally faster than other loans.
●
Flexible repayment options: Borrowers can often select from
various repayment plans to suit their financial situation.
●
Lower interest rates: Gold loans typically carry lower
interest rates compared to unsecured loans due to reduced lender risk.
Eligibility
criteria
●
Age: Most lenders require applicants to
be at least 18 years old, and some may set a higher age threshold.
●
Citizenship: Only Indian citizens are eligible
for gold loans from Indian lenders.
●
Type of gold: Generally, only gold jewellery and
gold coins (usually from banks) qualify, while gold bars may not.
Documents
required
●
Identity proof: Common forms of identity proof
include an Aadhaar card, PAN card, passport, driving licence, or voter ID card.
●
Address proof: Recent utility bills, Aadhaar
card, voter ID, or a rental agreement can be used.
●
Photographs: Passport-sized photographs are
often needed as part of the application process.
It is an easy and quick process to
get a loan secured by gold. Basic requirements include all these. Download the Bajaj Finserv app and provide all the information
asked to finish the application in order to apply for a loan secured by your
gold.
Steps to apply for a gold loan
- Valuation of gold: Take your gold items to the
lender's branch, where their quality and purity will be assessed to
determine their market value.
- Submission of documents: Submit the required documents
to verify your identity and address.
- Approval: Once your documents are verified, and the gold
valuation is complete, the lender will approve the loan.
- Disbursement: After approval, the lender
disburses the loan amount, often in cash or via a bank transfer.
Determining the loan amount
The loan amount is based on the
loan-to-value (LTV) ratio, which is capped at 75% as per RBI guidelines. The
LTV ratio is the percentage of the gold's assessed value that the lender is
willing to provide. For instance, if your gold jewellery is valued at Rs.
1,00,000, the lender can offer up to Rs. 75,000 as a loan.
Factors influencing the 22-carat gold loan rate
●
Gold purity: The purer the gold, the higher the
valuation and the loan amount. For example, 22-carat gold fetches a better rate
than 18-carat.
●
Market value: The gold rate is affected by
global market conditions and currency fluctuations, influencing the loan
amount.
●
Loan tenure: Shorter tenures may have higher
gold loan rates than longer tenures due to the greater risk involved.
●
Lender's policies: Different lenders offer varying
gold loan rates based on their internal risk assessment models.
Repayment options
●
Regular EMI: Pay the principal and interest via
regular equated monthly instalments (EMIs).
●
Interest-only payments: Pay only interest during the loan
tenure and repay the principal at the end.
●
Bullet repayment: Pay the entire loan amount,
including principal and interest, at the end of the term.
Points to consider before taking a loan against gold
●
Evaluate your gold's value: Verify the weight and purity of
your gold to get a clear idea of its worth.
●
Compare lenders: Different lenders offer varying
gold loan rates and repayment plans. Compare them to find the most suitable
option.
●
Understand the terms: Be aware of processing fees,
prepayment penalties, and other charges.
Conclusion
A loan against gold is an excellent way to meet urgent
financial needs without liquidating precious assets. Understanding the
eligibility criteria, documentation, and gold valuation process can help secure
the loan with ease. Given the rapid processing and competitive 22-carat gold
loan rates, this financing option is suitable for individuals seeking quick
access to funds. Evaluate your requirements, compare lenders, and familiarise
yourself with the terms to make an informed decision that aligns with your
financial goals.
