Indians have a great affinity towards gold. Also, note that India is among the topmost importers of gold. Indians make use of gold not just as an ornament but even as an investment. They can make use of it anytime to finance immediate cash needs. Whether there is any healthcare exigency, need for business expansion or any other financial requirements, idle gold can be best used to avail a loan against the same at lower rates. For instance, if you face an immediate financial exigency, then in that scenario you can approach Manappuram gold loan, to avail loan proceeds by pledging your gold at a lower Manappuram gold loan interest rate than availing a personal loan that usually has a higher rate of interest. Mentioned here are some of the crucial things you must keep in mind when placing an application for a gold loan.
Major things you must ensure to note when opting for a gold loan –
The Quantum of the loan gets determined by the gold’s value –
Various NBFCs and banks endow gold loans, but the loan amount differs from one lender to another. You will get higher gold loan proceeds when the gold purity is higher. NBFCs and banks have their own group to assess your gold to authenticate its purity. The disbursed amount is determined on this. You as a borrower can get 75 per cent to 90 per cent of gold’s value as the loan proceeds depending on the LTV (loan to value) ratio and lender.
So, in the case your gold equals Rs 1 lakh, you can get a maximum of 75,000-90,000 as loan proceeds. You must check out the maximum proceeds you can get as a gold loan before applying as lenders have restrictions on the maximum amount you can obtain as a loan against gold.
Authenticate the lender’s creditworthiness –
As there are several NBFCs and banks that provide a gold loan, selecting a suitable lender may be challenging. Before you apply for a gold loan, you must make sure that lender is credible and trustworthy. You will require being extra attentive and careful as you pledge your precious jewellery with the lender.
Also Check: Manappuram Gold Loan Interest Rate
You must ensure to authenticate the customer reviews as well as safety measures for the security of the gold that you pledge. Many unauthorised lenders and jewellers even provide gold loans at a slightly better deal and offer. But it is not recommended to avail offers from any unauthorised lender. There have been instances of fraud with such kinds of unauthorised lenders, where borrowers may fail to receive the gold pledged even after paying the complete amount.
Rate of interest –
The interest rate determines your monthly EMI, so it is an important parameter when you apply for a gold loan. As a gold loan by nature is secured, the interest rate is comparatively lesser than unsecured credit options like a personal loan. The gold loan’s rate of interest differs from one lender to another, and it falls in the range of anywhere between 7 per cent per annum and 29 per cent per annum.
The rate of interest is based on the gold’s purity and other parameters at the time of availing the gold loan. Thus, you must ensure to check out the interest rate of distinct lenders. Banks endow a lower interest rate than NBFCs. Also, the processing fees charged by the banks are lower than that of any NBFC. Usually, the processing charge levied by banks may range anywhere between 1 per cent and 2 per cent of the loan proceeds. So, before you avail a loan, you must ensure to check out the overall loan cost by comparing a few reliable lenders to make a wise decision.
Documents required to avail a gold loan –
You must ensure to provide some crucial documents when you apply for a gold loan. These documents might involve a PAN card, Aadhaar card, passport, voter ID card, driving license and others. Address proof is even required. For the address proof, you can submit any document like a ration card, Aadhaar card, bank account statement, voter ID, etc. Note that the documents required may differ across lenders.
How can you get a gold loan?
You can avail a gold loan against your gold jewellery and the need might differ across lenders. A few banks just accept jewellery while a few accept gold bars and coins.
How can you make repayment of your gold loan?
You can pay your gold loan interest constituent either on a monthly basis or quarterly basis and make the repayment of your principal component by the end of the repayment tenure. This differs across lenders. Also, you might opt to make payment of the whole interest constituent at the start of the loan repayment tenure and repay the principal constituent at a later date. Another mode to make the repayment of the gold loan is by repaying the loan in the form of EMIs that might involve both principal and interest constituents. The requirement differs across lenders.
Deposit of gold –
After submission of the gold loan application, an agreement for the gold loan is signed in between the bank and the customer. Next, the gold you have submitted to avail the loan proceeds is assessed and deposited by the bank in its vault. On the successful evaluation of your gold, the documents submitted and the form, the loan proceeds are disbursed. The financial institution holds the gold till the loan is repaid in full and on time. Gold loans generally have a duration of between 12 and 18 months.
Gold loan options provided by some of the reputed lenders are –
HDFC gold loan –
The distinct gold loan features provided by HDFC are –
- You are permitted to only pay the interest constituent on a gold loan per month.
- Availability of flexible loan repayment tenures.
- Gold loan proceeds start at Rs 25,000 and a minimal amount of Rs 10,000 is available in rural markets.
- Loan processing fees of the bank equal 1 per cent of the disbursal.
- Foreclosure fees are 1 per cent plus the applicable tax.
State Bank of India (SBI) gold loan –
You can get SBI gold loan by pledging gold coins or ornaments sold by the State Bank of India.
The distinct features of the State Bank of India gold loan are –
- Documentation is minimal with a lower rate of interest.
- SBI endows maximum loan proceeds of Rs 50 lakh and minimum loan proceeds of Rs 20,000.
- Processing charge is 0.25 per cent of loan proceeds along with applicable GST.