How to Avail a Gold Loan Online — A Step-by-Step Guide
A gold loan is a secured loan. It is similar to a mortgage loan as the borrower keeps their gold as collateral with a lender and avails capital.
Generally, a gold loan has a shorter term. In the case of a gold loan, the interest rate is lower compared to some other forms of loans.
The interest rates on gold loan are currently in the 7.5%-12% range, depending on the lender, but this could change depending on the country’s monetary policy. Typically, banks charge lower interest rates compared to non-bank lenders.
Life's unexpected financial challenges can be eased with a valuable resource often overlooked – your jewellery. Consider turning to a gold loan to navigate tight situations. This guide will help you understand and confidently access this financial option, transforming your valuable possession into a potential financial lifeline.
What is a gold loan?
A gold loan is a secured loan where you pledge your gold jewellery or coins as collateral to borrow money from a bank or financial institution. The loan amount depends on the purity, weight, and current market value of the gold, with an LTV (Loan-to-Value) ratio applied. Unlike unsecured loans, credit scores or income proof are not always essential since the gold itself secures the borrowing. This makes gold loans a practical way to raise funds for personal, medical, or business needs while retaining ownership of your gold assets.
What is the Procedure for a Gold Loan?
- Eligibility Check: Ensure you meet the basic criteria – 18+ years old (some lenders require 21+), Indian citizen, and proof of identity and address.
- Gold Valuation: Your gold's purity and current market value determine the loan amount. Most lenders offer gold loan-to-value (LTV) ratios of up to 75%, meaning you can borrow up to 75% of the gold's worth. Gold loan calculators online can give you a rough estimate, but a professional valuation at the lender's premises is crucial.
- Choose Your Interest Rate: Decide between fixed and floating rates. Fixed rates offer stability, while floating rates may be lower initially but fluctuate with market conditions. Weigh your risk appetite and financial goals before making this choice.
- Understand Fees and Charges: Don't get blinded by a seemingly attractive loan against gold rate. Ask upfront about processing fees, valuation charges, and storage costs to avoid hidden surprises.
- Read the Loan Agreement: This is your financial roadmap. Scrutinize the repayment terms, prepayment penalties, and default consequences. Don't hesitate to clarify any doubts with the lender.
- Repayment Options: Choose a plan that fits your budget. Early repayment can save you on interest, so consider using gold loan EMI calculators to strategize your payments.
Documents Required for Gold Loan
To apply for a gold loan, you generally need to submit basic KYC documents. Most lenders do not require income proof since the loan is secured against gold. Commonly accepted documents include:
- Identity Proof: Aadhaar card, PAN card, Passport, Voter ID, or Driving License
- Address Proof: Aadhaar card, Utility bill, Passport, or Ration card
- Recent Passport-sized Photographs
Some banks may also request additional documents depending on their policies.
Gold Loan Repayment Options
Gold loan repayment is designed to be flexible, with multiple methods available depending on your financial needs. The main options include:
1. EMI (Equated Monthly Instalments):
In this option, you repay both the principal and interest in fixed monthly instalments throughout the tenure. This option ensures regular payments and helps avoid a large payout at the end.
2. Bullet Payment:
In this method, no instalments are paid during the tenure. Instead, you repay the entire principal and accumulated interest in a single lump sum when the loan matures. This is suitable if you expect a future inflow of funds.
3. Interest-Only Payments:
Here, you pay only the interest amount at regular intervals (monthly, quarterly, etc.), while the principal is cleared in one go at maturity. This reduces the repayment burden during the loan term.
4. Partial Payments:
In this approach, you have the flexibility to pay off the loan in parts, either towards interest, principal, or both, at any time. This helps reduce the outstanding balance faster and can lower the interest cost.
Who is Eligible for a Gold Loan?
Gold loans are widely accessible since they are secured by your gold. Unlike other forms of credit, a high CIBIL score for gold loan is not always mandatory, as the pledged gold itself acts as security. However, meeting basic eligibility criteria is still important. Borrowers should:
- Be Indian residents above 18 years of age
- Own gold jewellery or coins of 18 to 24 karat purity
- Provide valid KYC documents such as Aadhaar, PAN, Passport, or Voter ID
- Approach a bank or NBFC authorized to issue gold loans
Why is a gold loan a better option than other types of loans?
A gold loan is often preferable due to its simplicity, quick processing, and minimal documentation. Let's explore about gold loan & its benefits:
- Minimal paperwork: Loan on gold requires minimal paperwork, often just basic identity and address proofs.
- No credit score worries: Unlike personal loans, a bad credit score won't hold you back.
- Quick access to cash: Gold loans offer speedy approvals and disbursals, often within the same day.
- Flexible repayment options: Choose a repayment plan that suits your budget, with monthly, quarterly, or even lump sum options available.
- Transparent process: Reputable lenders provide clear breakdowns of interest rates, fees, and loan terms, leaving no room for surprises.
Conclusion
Apply for a gold loan at IIFL Finance to get competitive interest rates, transparent terms, and flexible repayment options, making your gold loan journey smooth and straightforward. Visit IIFL Finance’s website or branch today and turn your treasure into a timeline for a brighter financial future.
Remember, a gold loan is a helpful resource, but use it wisely. Research thoroughly, compare options, and choose a lender who cares about your financial well-being. Your gold can be a valuable financial ally when approached responsibly, helping you navigate unexpected challenges with confidence. Stay updated on the gold rate today to make informed decisions about using this tool effectively.
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Apply NowFrequently Asked Questions
The gold loan process is usually quick. Once you submit your gold for valuation and provide basic documents, the loan is often approved and disbursed within a few hours, sometimes on the same day, depending on the lender’s procedures and verification process.
Loan approval for a gold loan generally takes less than a day. Most banks and NBFCs complete the verification, valuation, and documentation within a few hours. Some lenders even offer instant approval if the gold purity is confirmed and the required documents are provided.
A high credit score is not mandatory for a gold loan. Since the loan is secured by pledged gold, lenders may approve applications even without a strong CIBIL score. However, a better CIBIL score for gold loan can sometimes help in negotiating favourable terms.
The loan amount depends on the weight, purity, and current market value of the gold pledged. As per RBI guidelines, lenders generally offer up to 75% of the gold’s value as the loan amount, calculated through a Loan-to-Value (LTV) ratio.
Interest rates on gold loans vary across lenders, usually ranging from 7% to 25% annually. Loan tenure can range from a few months to three years, depending on the borrower’s needs and the lender’s policies. Shorter tenures often come with lower interest costs.
Gold loans may involve processing fees, appraisal charges for gold valuation, and late payment penalties if instalments are missed. Some lenders also charge foreclosure or renewal fees. It is advisable to check the fee structure with the lender before availing the loan.
Yes, lenders offer flexible repayment methods. You can repay through monthly EMIs, bullet payments at the end of tenure, interest-only payments during the term, or partial payments toward principal and interest. These options allow borrowers to choose a repayment style suited to their finances.
Most lenders accept gold jewellery of 18 to 24 karat purity. Bank-issued gold coins up to 50 grams per borrower are also eligible. Decorative elements, like stones, are excluded during valuation. Gold bars may be accepted by some lenders, depending on their policies
Disclaimer : The information in this blog is for general purposes only and may change without notice. It does not constitute legal, tax, or financial advice. Readers should seek professional guidance and make decisions at their own discretion. IIFL Finance is not liable for any reliance on this content. Read more
