Gold Loan – Best Ways about How You Can Apply for Gold Loan

For ages, gold has remained one of the most favourite metals of many. As per reports, the WGC, or World Gold Council, in the end of the quarter on September 30th, 2021, mentioned, the demand for gold had enhanced by 47 per cent depending on yearly basis in comparison to the quarter in the year 2020. While demand for the metal – gold in India stood at 123.9 tonnes pre-pandemic around the quarter of September 2019, it considerably shrunk to about 94.6 tonnes around September 2020. However, over the past few years, the demand for gold has surged and has been recorded at around 139.1 tonnes. 

There are several reasons why many people prefer to invest in gold, like for gifting, ornamental uses, religious or traditional offerings, asset formation, and even as an investment for hedging against evils like market volatility and inflation. However, do you have any idea if you hold gold, then you can opt for loan against the same? Do you know what gold against loan is? What is the gold loan interest rate? Read on to find answers to all these. 

What’s meant by gold loan?

A gold loan is a credit option, which is secured in nature and is offered against the security or asset that you pledge, i.e., gold. If you own gold bullion, ornaments, jewellery, etc. then you can mortgage the same to get a loan against the same. Essentially, the capital assets in the form of gold become security for availing a loan. Moreover, as gold loan is secured in nature, the gold loan interest rate is lower than unsecured credit options. 

What are the salient features of availing gold loan?

Crucial salient features of availing gold loan include – 

∙       Like personal loan, gold loan too is a multipurpose loan, with the only difference being that a personal loan is an unsecured credit option with higher rate of interest, while gold loan is a secured credit option with lower gold loan interest rate. Note that, multipurpose here means that you can use the loan proceeds for any purpose. 

∙       You can place an application for loan online and get the funds as fast as possible. 

∙       Lenders assess the value of gold mortgaged. Thus, the loan proceeds are decided based on the valuation of the gold and the current gold market price. 

∙       Rate of interest are lower as your loan is based by security, i.e., gold, which the lender may sell to realise the loan due if you default on the gold loan repayment. 

∙       Many bank lenders permit free insurance cover on gold that you provide as asset to the bank to avail the loan proceeds. 

∙       Lender holds the gold in a safe custody till the loan gets repaid. Once you close the loan account, the mortgaged gold is returned to you.  

Read: Flutterwave Scandal

How can you avail gold loan?

If you hold gold assets or securities and looking to finance for commercial or personal use, then you can mortgage such assets or securities and avail a loan against the same. Here’s how you may do it. 

Also Check: Gold Loan Interest Rate

Check out your eligibility criteria

The initial thing you must do for availing a gold is to check out whether you mitigate the lender’s eligibility parameter. Distinct lenders hold distinct eligibility parameters. However, basic needs stay the same. These involve the listed – 

Age – You must be at least 18 years of age. Many lenders have loans just if you are at least the age of 23 years. 

Income – You must have a steady and monthly income source. Minimum limit for income requirement differs across lenders. 

Credit score – A strong credit profile and score is a must to avail a gold loan. The good credit score ranges anywhere between 750 and 900. 

Check out the eligibility criteria set by the lender from where you want to seek the gold loan. Just if you mitigate the required eligibility parameters, the preferred lender will sanction you the required loan proceeds. 

Keep your required documents handy

A set of documents are required to establish as well as authenticate your identity, age, and income. Usually, lenders ask for the listed documents to proceed with your gold loan application – 

∙       Identity proof like your PAN card, voter’s ID card, Aadhaar card, passport, and others. 

∙       Age proof like your Aadhaar card, PAN card, passport, birth certificate, etc. 

∙       Address proof like your rent agreement, utility bills, Aadhaar card, property documents, etc. 

∙       Past 3 to 6 months’ bank statement. 

∙       Income proof like form 16, salary slips, IT returns, audited financial statements, etc. 

Keep all the required documents handy. Doing so, will allow you to stay prepared in the case of any financial exigency or requirement for money comes up. 

Compare different bank or NBFC lenders and select the prudent one

There are various lenders in the market; both non-banking financial companies (NBFCs) and banks providing gold loan. Thus, you must ensure to check the available lenders and then compare their rate of interest offered to you. Also, make sure to compare the loan amount presented to you by distinct lender. Select the lender having the lowest rate of interest so that your loan is at an affordable level. Additionally, look for lender that provides funds as per your need. 

Get the gold valuation done by a lender

Post you have conducted the comparison and zeroed on the preferred lender of your choice; you must get your gold elements valued to know the maximum loan proceeds that you can get. So, ensure to specific the gold asset quantum and then get the same valued. Note that, the valuation would be thoroughly based on the gold’s purity that you offer as security as well as its weight. In the case of gold ornament or jewellery, the weight of the semi or precious stones on the gold is not factored in while evaluating. So, better the gold’s purity and more the weight, higher would be the loan proceeds offered to you. 

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