India is one of the largest consumers of gold in the world, so instead of keeping the gold lying idle in your locker, you can utilise it for taking loans on a low-interest rate. Gold loans have for a long time been a secure means of obtaining finance in India, as most households in India have the yellow metal as an asset which can be given as collateral.
Gold loan is one of the options available for people when they need funds, especially the women who want to use their stree dhan. In case of gold loan, the loan money does not have a specified end-use, hence it can be used for any purposes like use in business, wedding, travel, home renovation, purchases etc.
With the increase in the interest rate of the other secured and unsecured loans, we have seen Indian borrowers let go of the resistance for pledging of gold ornaments. Besides that, the soaring high prices of the gold have pushed the loan eligibility on the ornaments making it a convenient, liquid and reasonably low-priced source of borrowing.
The loan against gold is a secured loan that is lent instead of gold ornaments such as jewellery. The loan amount sanctioned by lenders is generally a percentage of the gold. Repayment is similar to any other loan through monthly instalments.
After the entire amount is repaid, you can get the gold back. India is one of the largest consumers of gold in the world, so instead of keeping the gold lying idle in your locker, you can utilise it for taking loans on a low-interest rate. Gold loans have for a long time been a secure means of obtaining finance in India, as most households in India have the yellow metal as an asset which can be given as collateral.
However, the popularity of gold loans has soared high during the latter part of last decade when Kerala-based specialised gold loan NBFCs like Manappuram and Muthoot Finance spread their wings to other parts of the country. After that, banks also started popularising this product and started marketing gold loans aggressively. The process of gold loan is like any other secured loans. We need to take the gold articles, along with the relevant documents, to the lender. They evaluate the gold items and verify the submitted records. The gold loan has the highest LTV ratio as compared to any other secured loan. Also, being a secured loan, it has low-interest rates as well.
Gold loan these days are growing at a good pace in the market because the sheer convenience of getting a loan on something like gold is an excellent boost for the Indian households. The interest rates are so low, and the approval process is so much faster. Everything together adds to giving an individual a very convenient option to borrow. Most banks charge minimum processing fees of Rs. One thousand to upto 2%. Some banks may also offer lower processing fees.
With recent times and the policies in place where the unsecured loans like credit cards and personal loans charge exorbitantly high-interest rates, the gold loan comes handy. Even if we compare the gold loan interest rates to that of any other secured loan, the rates are comparatively lower. The gold loan can quickly be taken in the following cases:
- If you need the loan on an extremely urgent basis for a relatively short period of time, with low-interest rates.
- If you want to avoid extensive paperwork or have no income proofs to avail a loan, this loan requires only essential KYC documents.
- Not a very good credit history or CIBIL score.
- If you possess gold jewellery that you are willing to hypothecate, and you have no other collateral available for a loan.
- If you want to reduce your all-inclusive cost of borrowing, Gold Loans generally carry nil processing fees and pre-payment penalty, thus reducing the overall cost of the loan.
Gold is not only a precious metal but also a valued metal in the Indian household. Hence pledging gold for money raises safety concerns for everyone. With currently all the leading nationalised and private banks and NBFCs offering gold loan, the process has become safe and standardised. But always be vigilant while opting for a gold loan.