What Is A Gold Loan And How To Apply For One?

A gold loan is a type of secured loan. It's also referred to as a collateral loan. Click here to learn everything about how its different from other loans & how to apply.

17 Jun,2022 13:27 IST 222 Views
What Is A Gold Loan And How To Apply For One?
Gold accounts for a significant component of the Indian household’s wealth which has proven useful throughout the pandemic's financial turmoil. Small businesses, too, are resorting to gold loans for operating capital and personal needs as the economy booms. Last fiscal year, the demand for gold loans was high, and this trend is expected to continue this decade.

What Is A Gold Loan?

A gold loan uses gold as collateral. The process is similar to any other type of loan: you apply online or at a bank, meet with a representative to discuss your needs and finances, and sign an agreement stating exactly how much money you want to borrow and the repayment terms.
A gold loan is a type of secured loan. It's also referred to as a collateral loan, which allows you to borrow money with your gold as collateral. This loan amount is usually earmarked to pay off high-interest debt, such as credit cards or unsecured loans.

How Is A Gold Loan Different From Other Types Of Loans?

Gold loans are different from personal loans because they're secured by your jewellery. This means that if you don't pay the loan amount back, the lender can keep your jewellery as payment for the debt. In this way, there's less risk for lenders and they'll be more likely to approve your application for a loan.
Gold loans have been popular in India for decades, but recently in other parts of the world, too. They're often used by people who want to get extra cash without having to sell their jewellery or other valuables outright. There are many different types of gold loans available for different situations, so it's important to know what you're getting into before applying for one.
Gold loans differ from traditional loans in other ways, too:
  • They are simpler and quicker than a traditional loan. You don't need to provide proof of income or credit history—you just need to show that you have some gold jewellery or other precious metal items.
  • They usually come with lower interest rates than traditional loans and shorter payback periods. This makes them more affordable for borrowers who may not be able to afford higher interest rates or longer paybacks on their own.
  • With the rise of fintech, you can apply for them online or over the phone.
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What Is The Amount You Can Borrow?

The amount you can borrow will depend on the weight of your jewellery, as well as its value. The interest rate will be determined by the state and type of bank you choose. Some banks offer fixed rates, while others offer variable rates that are subject to change.
In any loan that is given against a security eg. shares, home, gold, etc. the lender gives only a portion of the security value as a loan. This is called the ‘Loan to Value’ (LTV). In India, the Reserve Bank of India (RBI) has regulated that LTV for gold . 
To apply for a gold loan, first, contact any bank or credit union in your area that offers these services. You will need to provide them with some primary information about yourself and any collateral you may have available.

How To Apply For A Gold Loan?

Getting a gold loan is very easy. All you need to do is the following:
Step 1
Go to the nearest IIFL Gold Loan branch. If you have trouble finding it, you can use the branch locator for easy access.
Step 2
Submit the following gold loan documents: a proof of identity (like Aadhar, PAN, Passport, etc), proof of residence (like electricity bill, Driving License) and the gold that you’re pledging as collateral.
Step 3
The in-house valuers shall appraise the gold, determine the eligibility of cash to asset and approve your loan amount.
Step 4
Based on the appraisal report, the underwriting and your permission, you can get the loan amount as cash/ via bank transfer.

Apply For IIFL Gold Loan Today

IIFL Finance has served over 6 million happy customers, providing transparent services and maximum value for their gold. We have also reported a 19 per cent year-on-year growth in its gold loans AUM to ₹13,600 crores as of September 30, 2021. With almost 2300 branches spread across India, we’re near you to ensure you get a convenient, quick and comfortable experience.

Frequently Asked Questions

Q1. What Is A Gold Loan?

Ans. When a lender asks you to deposit/ pledge gold as security/ collateral in exchange for cash/ loan, it is called a gold loan. By structure, it is always a secure loan, where you are eligible to get up to a certain percentage of your gold’s value as a loan.

Q2. How To Apply For A Gold Loan?

Ans. While there are both digital, physical and hybrid processes to apply for a gold loan, the most popular way in India is to approach a bank/NBFC, submit your documents along with gold for appraisal and get an instant approval for the cash.

Q3. What Is The Interest Rate On A Gold Loan?

Ans. The average gold loan interest rate depends on financial institution that varies between 9% to 28%

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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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