Key Features & Benefits of Gold Loan
08 Sep 2023

Key Features & Benefits of Gold Loan

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Breaking down the procedure of Gold Loan, its features and advantages

Key Takeaways

  • Gold Loans are secured loan wherein you can pledge your gold to get cash.
  • You can obtain the loan within minutes with minimal documentation.
  • Key features of Gold Loans include high LTV, instant processing, and no end-use restrictions.
  • Lenders offer flexibility in terms of varied repayment modes and tenures.
  • The bank returns the gold to you once you repay the loan in full

‘Dust on gold, does not change the nature of gold’ – this popular saying simply means that irrespective of whether you use your gold or store it securely, its value never decreases. Indeed, gold is an incredibly valuable investment. If you need money to finance a contingency, you can use your gold to accumulate the funds. You may sell your gold or mortgage it to obtain a Gold Loan. Continue reading this article to understand the features, process, and benefits of Gold Loans.

Features of Gold Loan

A Gold Loan is a secured loan that Banks and Non-Banking Financial Companies (NBFCs) offer. The salient features of Gold Loans include the following:

  • Competitive interest rates

    Since lenders secure their investment risk and take custody of the pledged gold, they typically levy attractive, low interest rates on Gold Loans as compared to other unsecured loans.

  • Minimal documentation

    You do not need to provide heaps of documents while obtaining Gold Loans. Banks usually ask for one copy of your ID and address proof documents each, to complete the KYC process. They do not ask for income or employment proof documents either.

  • High loan-to-value ratio

    Lenders may provide up to 85% of the current market value of the gold as the loan amount. However, the maximum LTV you can obtain differs from lender to lender.

  • Instant processing

    Banks weight your gold in front of you and instantly disburse the loan amount. You typically get the funds within minutes of pledging your gold.

  • No end-use restrictions

    You can use the funds procured from the Gold Loan to pay for all kinds of expenses, whether urgent or leisurely. The lender does not ask how you intend to use the loaned amount.

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What is the Gold Loan Process?

Here is a step-wise guide on the procedure of Gold Loan.

  1. Research about different lenders offering Gold Loans.
  2. Approach your preferred lender with your gold jewellery, coins.
  3. Submit the duly filed loan application form along with the necessary ID and address proof documents.
  4. The lender weights the gold, evaluates its purity, and determines the loan amount you can get.
  5. The lender sanctions your loan, while preserving the gold as collateral.

Once you repay the loan in full, the lender returns your gold to you. However, if you are unable to repay the loan within the stipulated tenure, the lender has the right to sell/auction it off the gold to recover their investment.

Benefits of Gold Loan

You can enjoy the following benefits of Gold Loan.

  • Easy eligibility

    Lenders do not lay down any strict . You simply need to be a Resident Indian, usually in the 18-75 years age group, and someone who can pledge gold as collateral, to qualify for the loan.

  • Zero prepayment charges

    You can repay your entire Gold Loan anytime between the loan commencement and maturity date. The lender does not levy a prepayment penalty if you choose to close your loan before the stipulated tenure ends.

  • Flexible terms of repayment

    Lenders allow you to repay your loan in Bullet i.e., Principal and Interest to be paid at the end of the tenure.

  • Ability to reuse gold

    After repaying the Loan, the lender returns your gold to you. If you need funds again, you can pledge the same gold and get more money. In such situations, you stand to obtain a higher loan amount if the market value of the gold increases.

Final Note:

So, if you need funds urgently, at lower interest rates, a Gold Loan is an excellent option. It is an incredibly secure loan that allows you to get the necessary funds, while preserving your investment, which the bank returns to you upon successful repayment.

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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.