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Gold loans offer numerous benefits to borrowers, including lower interest rates, quick disbursal, no credit score requirement, and more.
Gold loans are processed faster compared to other loan types. Since the gold acts as collateral, lenders can easily sanction the loan without extensive documentation or credit checks, making it a great option for urgent financial needs.
Unlike other loans, gold loans do not rely heavily on the borrower’s credit history. This makes them accessible to a wider range of individuals, including those with low or no credit scores.
Gold loans generally have lower interest rates compared to unsecured loans like personal loans. This is because the gold pledged acts as security, reducing the risk for lenders.
Gold loans offer flexible repayment options, including EMI-based repayment or bullet repayment at the end of the loan tenure. Borrowers can choose repayment terms that suit their financial situation.
Gold loans typically provide a high loan-to-value ratio, allowing borrowers to secure a loan amount up to 75-90% of the gold's market value. This ensures that borrowers can maximize the value of their pledged gold.
Even though the gold is pledged as collateral, ownership remains with the borrower. Once the loan is repaid, the gold is returned safely to its owner.
Gold loans have become a popular financing option due to their convenience and speed. To avail of a gold loan, the borrower pledges gold ornaments or coins to the lender, and the loan amount is disbursed based on the gold's purity and weight. The pledged gold remains with the lender until the loan is repaid.
Gold loans can be used for various purposes, such as meeting personal expenses, funding business needs, or paying for medical emergencies. However, borrowers should carefully assess the gold loan interest rate and repayment terms to avoid financial strain.
While gold loans are not directly eligible for tax benefits, they can indirectly help reduce taxable income when used for certain purposes like business expansion or home construction. Borrowers should consult a tax advisor for guidance.
| Particulars | Details |
| Loan-to-Value Ratio (LTV) | Up to 90% of gold's market value |
| Repayment Options |
a. Regular EMIs b. Bullet repayment |
| Interest Rates | Lower than unsecured loans |
Some of the gold loan rejection reasons are given below:
A gold loan can be closed by repaying the loan amount in full or via foreclosure before the agreed tenure.
If you have completed the repayment tenure, you need to visit the lender, fill out the required closure form, and retrieve your gold pledged as collateral.
If you decide to foreclose before the end of the tenure, you will need to pay the outstanding loan amount along with foreclosure charges.
These fees and charges are associated with gold loans throughout the loan tenure:
| Processing Fees | It is a one-time charge that the borrower pays for processing the loan application. This is non-refundable and paid in advance. |
| Application Fees | This is a non-refundable fee charged when applying for a gold loan, generally ranging from Rs. 500 to Rs. 2,000. |
| Foreclosure Charges | These charges are applied if you decide to pay off the loan amount before the tenure ends. The charges can range from 1% to 3% of the outstanding loan amount. |
| Loan Tenure | The maximum tenure for a gold loan is generally 1 to 3 years, depending on the lender and loan amount. |
| Loan Amount | The maximum loan amount can be up to 75% of the gold's market value, depending on the lender and the quality of the gold. |
A gold loan isn't just a loan for urgent financial needs, and it can be used for various purposes, each with different interest rates.
This is the most common type of gold loan. The bank lends a percentage of the gold's value, and the interest rates typically range from 9% to 24% depending on the lender.
This is a type of gold loan where the borrower gets an overdraft facility secured by their gold. Interest is charged only on the amount withdrawn, making it a flexible option.
This loan type is aimed at farmers who can use gold as collateral to meet agricultural needs like purchasing seeds, fertilizers, or machinery.
To avail of a gold loan, you need to provide the following documents:
| PAN and Aadhar Card | Applicant's Passport |
| Voter ID Card | Driving Licence |
| Utility bills (electricity or telephone bill) | Salary slips of the last 3 months |
| Identity proof that contains address (like Aadhaar Card) | Bank account statements |
| Passport-size photographs of the applicant | Gold ownership proof (Bill of purchase or certification) |
Below are some essential tips to help first-time gold loan borrowers navigate the process smoothly:
Make sure the gold you are pledging is of good quality and has a reasonable market value. A higher value can get you a larger loan amount.
Compare interest rates, processing fees, and terms from various lenders before choosing the best option.
Be aware of any hidden charges like processing fees, foreclosure charges, and penal interest rates.
Understand the terms of the loan, including repayment schedules, interest rates, and tenure before signing the agreement.
Plan your repayment carefully to avoid high interest charges and potential loss of your pledged gold.
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