What is Gold Loan and how does it work
Gold is traditionally one of the most popular investment options in India. However, apart from being an attractive investment option, your gold ornaments can also help you get a loan at times of need. Check out this post to know what this loan is and how it works.
Life is full of uncertainties and financial difficulty is one such uncertainty that evades almost no individual. Loans are one of the best ways to tackle such financially stressful events. However, while there are now many different types of loans available, a Gold Loan is one of the best options to meet your financial requirements at such times of need. While gold has always been a popular investment option in India, loan against this precious metal only adds to its popularity. But, what is a Gold Loan and how does it work? Let us have a look:
What is a Gold Loan?
Loans are of two types, secured and unsecured. Unsecured loans such as a Personal Loan are given without any collateral. On the other hand, a secured loan such as loan against gold is given against collateral; in this case, your gold ornaments. As the lender has collateral or security against this loan, they are known to be cheaper than an unsecured loan. So, a Gold Loan is when you keep your gold ornaments as a collateral to borrow money from a lender. The amount sanctioned as the loan is generally a certain percentage of the total cost of the gold you have deposited.
Interest Rate and Tenure of Gold Loan
As mentioned above, Gold Loans are secured loans and are thus, generally cheaper than unsecured loans. The Gold Loan interest rate can range between 10% and 16% but can be higher depending on the lender you select. These loans are generally offered for a period of 6 months to 12 months. Repay the entire loan on time, and you can get your gold ornaments back in the same state as you first deposited them at the time of taking the loan.
Documents required for taking a Gold Loan
You can take a Gold Loan per gram of the ornaments you own. As compared to most other types of loans, the documentation requirements of such loans are minimal. Most banks only require you to submit ID proof, address proof and two photographs. As you are keeping your gold as security with the lender, factors such as your credit score, income, age, etc. are not taken into consideration by the lender.
Charges of Gold Loan
Apart from the interest rate, there are a few important charges that you should know about before taking a Gold Loan. Some of the most common charges are a processing fee, documentation charges and overdue handling charges. If you want to foreclose the loan, there are generally charges for the same, which are applicable up to a particular duration of the loan tenure. You can also renew the loan if required by paying the renewal fees.
Taking a Gold Loan
Taking a loan against gold ornaments is as easy as visiting the nearest branch of the lender with your gold ornaments. Your ornaments will be valued in your presence for calculating the maximum amount you can borrow. If you want to go ahead with the loan after valuation, you will be required to fill a loan application form and submit the required documents. The lender will instantly approve the loan and disburse the loan amount.
Gold Loan for dealing with Financial Emergencies
As you can see, a Gold Loan is one of the most convenient ways to deal with financial emergencies. With an attractive Gold Loan rate per gram, flexible repayment tenure, minimum documentation and instant approval, the loan is borrower-friendly and more affordable than many other types of loan. So, if you are struggling with a financial emergency and have gold ornaments, look for a top bank for a Gold Loan to take advantage of this highly convenient offering.
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