Decoding the Gold Loan process, documentation, and eligibility.
When you need a lumpsum amount during an emergency, and cannot find a way to come up with the cash quickly, a Gold Loan can offer some respite. You simply need to take your gold to a financial entity like a Bank or a Non-Banking Financial Company (NBFC) and obtain the loan. One of the easiest to obtain, a Gold Loan allows you to fund your contingencies and you can avail of it in minutes. Read on to understand the Gold Loan process and eligibility criteria.
A is essentially a type of secured loan, wherein you must provide gold assets like jewellery, gold coins Etc., as collateral to obtain funds. The lender considers the weights of the gold provided as collateral to determine the maximum loan amount you can get. The loan amount you can get is usually a fixed percentage of the current market value of gold. Lenders have the discretion to determine the Loan-To-Value ratio and the maximum loan amount you can get.
Repayment options of Bullet i.e., repayment of interest and principal at the end of the loan tenure. In most cases, you must repay the loan within 6 to 12 months of procuring it.
To obtain most loans, you must show a credit score and a monthly income exceeding a certain amount. While your monthly income and credit score are not significant aspects for Gold Loans, there is one vital factor of eligibility for Gold Loans – you must provide gold as collateral. Also, you need to be a Resident Indian, within an age group typically ranging from 18-75 years.
Gold Loan lenders consider your occupation and employment status. Most lenders offer loans to salaried individuals, self-employed professionals, business owners, entrepreneurs, senior citizens and home-makers.
Additionally, banks have set criteria for the type and carats of the gold accepted as collateral. For instance, you may mortgage only gold jewellery or coins, and the purity of the gold should be 18 carats and above.
The documentation process for Gold Loans is arguably the easiest. Most lenders typically ask you to provide these basic documents for Gold Loan.
If the sums loaned exceed a specific amount, lenders may require you to provide a copy of your PAN card. Some lenders may also insist that you provide documents/bills proving the gold belongs to you.
With such an easy application process and simplified eligibility for Gold Loans, anyone can conveniently apply for the same. Once you repay the loan, the lender returns the gold pledged as collateral. If you are unable to repay the loan after a stipulated tenure, lenders may sell your gold to offset their losses.
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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.