Many of the houses in India have idle gold that is lying inside the lockers without any productive use. The gold can be put to use when one needs it the most. Gold can be used for every urgent need in the funding of immediate financial requirements with just pledging it and not selling it. There are several banks and NBFCs in India that offer gold loans for their customers at the most attractive rate of interest. When availing for a gold loan, one must understand the procedures of the loan in a transparent way.
Procedure for availing a gold loan:
The gold loan procedures usually vary from one lender to another as well as one financial institution to another. The gold loan works on a simple idea where you pledge the gold and avail of the loan amount. But there are a few steps involved. They are,
- One has to visit the financial lender with the gold physically.
- There is a set of required documents for the gold loan. The documents mandatory are requested to be submitted to the lender.
- The pledged gold is checked for purity, and the weight of gold is determined.
- The gold is evaluated based on its value in the market. In most cases, the gold loans are sanctioned with 80% value of the pledged gold.
- The lender will approve the loan availed only after the evaluation of the purity and verification of documents submitted.
- One can apply gold loan online in NBFCs or banks through their official websites as well as mobile apps. Even though one applies online for the loan, it is mandatory to visit the lender in person for at least once to deposit your gold that is to be pledged.
- One can also register with the lender’s customer portal as well as the mobile application by linking the bank account with it. In any financial emergency or crisis, one can always avail of a gold loan and have funds disbursed instantly.
- Applying for a gold loan is always simple as well as a short process. The approval of the gold loan is very quick and instant.
- In these loans, there is no need or necessity for having a guarantor or an introducer.
- Most importantly, the credit history of the applicant is also not checked. These loans are always very safe.
Documents involved in availing a Gold Loan:
The documents needed for the gold loans are very minimal and simple when compared to other loans. With the list of documents listed below, one can avail of a gold loan easily.
- The identity proofs such as the ration card, driving license, Aadhar card, and PAN card are required to be submitted.
- The address proofs such as the Passport, Voters ID, Telephone bills, or gas bills are required to be submitted.
- The signature proofs such as the driving license as well as the signature in the passport will be verified.
- The applicant should also submit two passport size photographs for the documentation procedure.
- The processing fee or charges that are involved in the gold loan is very less as it is a secured loan.
- The details, such as any bill for the gold that is being pledged is requested.
Merits of a Gold loan:
Quick Processing- Gold loans are the most secured loans, and they offer very lenient eligibility criteria as well as very minimal documentation. There is no credit score required for the approval of loans. These loans are usually disbursed in just a few hours instantly. The applicants who are eligible for the gold loans through online mode can avail of the loan in minutes.
Low-interest rate- When compared to the unsecured loans, these gold loans are very secured and charges a lower rate of interest. Since the gold loans have collateral, the rates can be reduced even further.
Zero processing fee- In most of the banks and NBFCs, there is no processing fee involved. And in some cases even if the lender charges the processing fees, it will be around 1%.
No foreclosure charge- Most of the lenders do not even levy any pre-payment charges, which is different from some other banks as they charge a pre-payment penalty of 1%. The repayment is very flexible as the applicant is eligible to return the money in parts in-between the loan tenure as well as the entire amount before or at the end of the term with no pre-payment penalties involved.
No income proof needed- Financial institutions always do not inquire about the income proof of the applicant in terms of the gold loans as the gold is secured. So the gold loan can be availed either by an earning applicant or one who does not.
No credit score- Gold loans always do not require any information about credit scores or history of credits. In other cases, the loan amount is always given based on the repayment capacity and also the credit history of the borrower. Still, in the gold loan, the amount is decided based on the value of gold in the market.
De-merits of a gold loan:
- The amount for a gold loan varies from one lender to another based on the financial market.
- A certain percentage of the value of pledged gold in the market is offered to the applicant. The amount for a loan is usually based on the Loan to Value ratio. This ratio is different from one lender to another.
- During forfeit and auction due to non-repayment of the gold loan, the borrower will lose the value of stones in the ornament that might be precious to them.
- In the case of default in the gold loan, the lenders always have the legal right to freeze the assets and also give it to auction for procuring the outstanding amount on the Gold loan.
- When applying for the gold loan, gold rates usually have a key role that will enable the lenders to ascertain the amount of money to lend. So the gold rate will have a direct equation with the loan amount, and they vary with the rate.