The gold loan has been one of the trending loan facilities for meeting instant financial requirements. Gold being one of the most liquid assets in the world makes it easier for people to get instant cash when required. Be it for settling an emergency medical bill or for conducting a funeral; gold loan helps to meet an individual’s unexpected expenses that cannot be covered under a credit card.
What is a gold loan?
A gold loan is a type of secured loan against gold. It means a borrower takes some amount from the lender by pledging gold ornaments. The loan amount gets determined on a percentage of the gold’s value. The best thing about it is that you need not wait long for the processing formalities. Also, there are fewer eligibility criteria to get them processed. Even if you have a low credit score, but a good stock of gold in your locker, then you are easily eligible to get the credit.
How does the gold loan work?
You take your gold ornaments and pledge it for getting a loan. The lender evaluates the gold and sanctions a loan after verifying the identity of the customer and documents. Generally, the process is quick and usually takes less than an hour.
Documents required for getting a gold loan
As these days, your Aadhaar card and bank passbook are linked, you need to submit any additional documents unless you do not have an account in that same financial institution. The documentation for each bank differs. Individual banks may ask for address proof, ID proof along with a passport size photograph.
Gold loan eligibility criteria
Anyone who has the right amount of gold jewellery in their locker or custody can apply and get eligible for a gold loan. This includes salaried employees, homemakers, farmers, businesspeople, etc.
How long is the maturity period of a gold loan?
They have a short maturity period between six to 12 months. Lenders also allow you to renew the loan and extend the tenure.
What happens if I do not repay the amount within the said time?
Since the tenures are short, repayment must be made promptly without any defaults in the payment. Failure of repayment may result in losing your pledged gold. The lender then auctions it off to recover the loan amount.
Things to consider before taking a gold loan
- Compare the rates and rules of different lenders
- Check for the credibility of the lender. It would be advisable apply for loans online
As years pass by, the value and gold rates have increased, making it one of the luxury assets. In a country like India, gold has got a lot of significance in terms of prestige, investment and money.