What Is Gold Loan?

Before you apply for a gold loan from a lender, learn everything about it to make an informed decision. Read to find out all about the gold loan & its process here!

1 Nov,2023 06:14 IST 3716
Gold Loan Kaise Milta Hai? Understand The Meaning Of A Gold Loan

If you face a cash crunch, you may not find much help from conventional banks. That's why many people opt for alternative financial choices like gold loans. A gold loan is a type of secured loan that lets you borrow money by pledging your gold jewellery as collateral. You can consider taking a loan on gold for various reasons, such as emergencies, medical bills, education, business projects, or personal goals. This loan option has become very popular because of its easy availability, fast processing, and various advantages. Let’s explore what gold loans are, how they work, their benefits, eligibility criteria, and the application process.

What Is Gold Loan?
Aakhir Gold Loan Kya Hota Hai?

The meaning of a gold loan is quite simple. It is a kind of secured loan that uses gold as security. This means that you have to pledge your gold to the lender, and they will give you money based on the value of your gold. This differs from unsecured loans, where you don't have to provide any security but may have to pay higher interest rates or face stricter eligibility criteria. A gold loan is a convenient financial option for people who own gold and need money quickly.

How Does A Gold Loan Work?

The process of obtaining a gold loan is relatively straightforward:

1. Gold Valuation:

The lender assesses the purity and weight of the gold to ascertain its value, establishing the maximum loan amount you qualify for.

2. Loan Offer:

The lender provides an offer outlining the loan amount, interest rate, and other parameters after the valuation is finished.

3. Acceptance and Documentation:

In addition to the promised gold, you will need to present proof of identity and address if you accept the terms. After that, the lender will hold the gold as loan collateral.

4. Disbursement:

Following documentation verification, the loan amount is either deposited into your bank account or sent to you as a demand draft or cheque.

5. Repayment:

It may include making interest payments regularly, repaying the loan's principal in full at the end of its term, or making interest and principal payments in installments.

Benefits of Gold Loans:

1. Quick Processing:

One of the most significant benefits of gold loan is its speedy approval process. Traditional loans might involve lengthy paperwork and evaluation procedures, but gold loans often require minimal documentation and are processed swiftly.

2. No Credit Check:

Lenders are less concerned about your credit history since gold loans are secured by collateral. This makes gold loans accessible to individuals with varying credit scores.

3. Flexible Repayment:

Gold loans offer flexible repayment options. Borrowers can choose between paying interest regularly and repaying the principal amount at the end of the loan term or paying both interest and principal in installments.

4. Lower Interest Rates:

Typically Gold loan interest rate compared to unsecured loans, as the collateral mitigates the lender's risk.

5. No Prepayment Penalty:

Many gold loan schemes allow borrowers to repay the loan before maturity without any prepayment penalties.

6. No Usage Restrictions:

Unlike some loans with specific usage restrictions, a gold loan allows the borrower to utilize the funds as per their requirements.

How To Apply For A Gold Loan Online OR Gold Loan Kaise Milta Hai?

Applying for a gold loan online has become increasingly convenient. Many of the banks and NBFCs (Non-banking Financial Companies), such as IIFL Finance, have made it an entirely hassle-free process, especially in the case of online applications. Just follow these steps:
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Research and choose a reputable lender with favourable terms and interest rates.
Ensure you meet the lender's eligibility criteria, including age, nationality, and gold purity.
Complete the online application form with your personal and gold-related details on the lender's website.
Check the documents required for gold loan, which generally include ID proof, address proof, and gold ownership proof.
The lender will guide you through the process of sending the gold to them for valuation. Once assessed, they will make a loan offer.
If you're satisfied with the offer, accept it. After verifying the documentation, the loan amount will be credited to your bank account.

Gold Loan Interest Rates and Processing Fees

Gold loan interest rate vary from lender to lender and can be influenced by factors such as loan amount, gold loan-to-value ratio (LTV), and the loan duration. Lenders also charge processing fees for administrative expenses and can vary. It's crucial to compare interest rates and processing fees from different lenders before deciding.

 

Gold Loan Documents Required

The documentation required for a gold loan typically includes the following:

Identity Proof Aadhar card, passport, voter ID, or driver's license
Address Proof Utility bills, ration card, rental agreement, or Aadhar card
Ownership Proof Invoice, receipt, or certificate of ownership for the pledged gold
Photo Identity Proof Usually 2 to 4 recent passport-size photographs

Gold Loan Eligibility Criteria

While eligibility criteria for gold loan might differ between lenders, IIFL Finance requirements include:

1. Age: Typically, borrowers need to be between 18 to 70 years

2. Gold Ownership: You should own the gold you intend to pledge.

3. Gold Purity: It should be between 18 to 22 carats

4. LTV Ratio: Maximum 75% of Loan to Value ratio of the gold pledged

Conclusion

Gold loans provide a valuable financial solution enabling individuals to access funds quickly without an extensive approval process. The ease of application, lower interest rates, and flexible repayment options make gold loans attractive for many.

IIFL Finance has gone a step further and made the process even more simpler by introducing the ‘Gold loan at home’ service in top 30+ Cities in India, wherein you can call and fix an appointment and a representative will come to your doorstep and complete the process right from application to valuation to disbursal in front of your eyes, then and there itself.

However, like any financial decision, it's crucial to understand the terms and conditions before committing to a gold loan. Whether you're facing an unexpected expense or aiming to achieve a personal loan, a gold loan could be the bridge to securing your financial aspirations.

FAQS

Q1: What is gold loan tenure?
A: The gold loan tenure is the time frame within which a borrower must return the loan balance plus interest. It varies based on the borrower's preference and the lender, from a few months to years. While maximum gold loan tenure have lower monthly payments but higher overall interest, shorter tenures have higher monthly payments but lower interest.

Q2: Who can avail the gold loan?
A: Individuals who own gold assets such as jewellery can avail a gold loan. This includes many people, including salaried individuals, self-employed individuals, farmers, business owners, housewives, students, and senior citizens.

Q3: How to calculate gold loan amount?
A: You can calculate your gold loan manually by utilizing a specific formula: EMI = [P x R x (1+R)^N] / [(1+R)^N-1], where P represents the principal amount, R signifies the interest rate, and N denotes the number of installments. Yet, manual calculations can be time-consuming and susceptible to mistakes. You can use our Gold Loan Calculator online to know your loan amount as per gold weights.

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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