Gold loans are available in both secured and unsecured form. Secured gold loans are those where the borrower pledges his or her jewellery as collateral and unsecured gold loan means that you don’t need to pledge any collateral for getting the loan. You can also get a gold loan by pledging a combination of different kinds of valuable items that you own. Often borrowers prefer to pledge their land or property against the gold loan as this assures them of quickness in disbursement and easy access to money.
A gold loan is a one-time loan that can be issued by banks, NBFCs and jewellers. The borrower needs to have an account with the lender and must also provide his/her PAN card for KYC. The loan value will be settled on the spot once the borrower has identified which jewellery he/she intends to pledge. If a bank or NBFC is giving you the loan, you will get a cheque in your hand at that time. However, if your local jeweller is giving you a gold loan, then he will give you an IOU or promissory note and keep the jewellery valued till you repay the loan with interest.
Key aspects you should know about a gold loan before availing the same
Know how much loan you can get. That will depend on the value of the gold. The bank or financer will consider the equivalent of 22 carat gold, so if your gold is of lower carat then proportionately the quantity will be reduced. Banks normally give loans up to 70% of the market value of the assessed quantity of the gold pledged. Additionally, there are no income documents required other than a PAN card and Aadhar card. Know who you’re buying from – buyer beware!
When it comes to getting a loan, banks are not always the best option for everyone. If you have an existing relationship with a bank, then maybe you can get gold from them at competitive rates but otherwise, there are more options available online. In addition to banks, non-banking finance companies (NBFCs) also offer gold loans and the rate of interest of gold loan depends on the amount of gold pledged and the cost of funding from which they have to pay back to their lenders.
Short term loans have a specific time period of up to 12 months. They have to be repaid by the end of that time period. If you think that you are not going to get this loan and want to extend your loan period then it is advisable to talk with your bank beforehand. Make sure that they agree to extend the loan and make sure that as well there will be no bad consequences like having your gold being auctioned or getting a lower rate than normal.
When it comes to gold loans, people often feel that security of their gold will be in safe hands. However, the credibility of the lender is also important because if you do not get your gold back in time then it will affect your finances severely. Be sure that you are maintaining a good relationship with the loan provider and have all the necessary documents before applying for a gold loan as this will help you out in case anything goes wrong during repayment period.
Ideally, the gold loan should help you pay the debt at a lower rate of interest. Moreover, it’s also important to know that banks usually give you the option of paying back portions in installments or just by paying off the principal amount at the end of your tenure. So, going for a gold loan is not a bad idea if you are planning to buy jewellery or other precious metals and are short on cash. Do remember that banks may have different repayment options so it’s important to study them carefully before making any final decision.
