When considering borrowing against gold, taking certain precautions and understanding the critical aspects of gold loans is crucial. Please do so to avoid financial loss. Here are some essential things to consider:
Banks are often the first place people turn to when they urgently need a large sum of money. While borrowing from external sources may result in higher interest rates, banks offer various loan options.
A gold loan is ideal if you require quick access to funds with lower interest rates. A gold loan can provide rapid assistance during emergencies, as banks typically process these loans quickly. However, there are essential factors to consider before taking out a gold loan.
Can I apply online?
While applying for a loan against gold traditionally involves visiting a bank in person, some banks now allow online applications.
After applying, a bank representative will visit your home to verify the purity and weight of the gold used as collateral.
This is done using specialized equipment to ensure accurate valuation. Once the assessment is completed, the loan amount will be deposited into your bank account within 30 minutes.
What are the qualifications for a gold loan?
Obtaining a gold loan is a straightforward process with fewer restrictions than other types of loans. No income proofs are required, and a low credit score is not a barrier.
The loan is sanctioned based solely on the value of the gold, giving you the power to secure a loan when you need it most. You are eligible for a gold loan if you have an account with the bank and are at least 18 years old.
How much can I borrow?
Gold loans typically have a high loan-to-value ratio, allowing borrowers to obtain up to 75% of the value of the gold pledged as collateral, as per Reserve Bank of India guidelines.
This means that if the current rate for 10 grams of jewellery is Rs.64,000, the maximum loan amount would be Rs.48,000, giving you a clear understanding of how much you can borrow against your gold.
Gold Loan Overdraft
Some scheduled banks offer overdraft facilities on gold loans. An overdraft account is a type of bank account from which you can withdraw more money than you have in the account up to a specific limit.
The loan amount is deposited into this account, which allows the borrower to withdraw funds as needed. Interest is only charged on the amount borrowed. The principal and interest must be repaid when the loan tenure ends.
Processing fees and documents
Banks typically charge processing fees for loans, ranging from 0-2% of the loan amount, with GST added on top. The specific fees may vary from bank to bank. To obtain a gold loan, you must provide address proof, date of birth, PAN card number, and photographs.