Life is uncertain. We must prepare ourselves for the worse. In our whole lifetime, there will always be a time where we need to tackle some financial difficulty. In our hard times, gold loan acts as a convenient commodity.
Gold is regarded as one of the safest forms of investment in India. There is hardly any Indian household that doesn’t have gold in the form of bullion or jewelry. The reason behind investing in gold is that one can quickly sell it at the time of an emergency to obtain money.
It is not only one of the most liquid forms of savings but also the safest way to keep your savings. The gold loan rate today and the overall market structure shows a good time for investment in the gold loan investment plan.
A significant proportion of people are confused. Some people treat goals as a relic, yet others wish to draw the benefits out of a gold loan. Gold is more than a possession and can be considered an excellent form of investment.
Also, Pledging gold to avail of a loan against gold is a safe option.
However, if you have an emotional connection with your gold jewelry, you can face hardships to sell it off. In case you don’t prefer to sell off your gold, then as an alternative availing, a gold loan will be a good option. If you don’t know how gold loans work, we are going to discuss in this article the things about a gold loan.
All About Gold Loan
Gold Loan acts as a secure form of a loan. This means the bank would require you to keep gold jewels as security.
Also, the carrot and per gram value of gold holds a lot of value. Generally, the amount of gold is 80% of its total value. The ratio can vary from bank to bank.
Documentation required for Gold Loan
Availing a gold loan is considered to be a hassle-free option. The documentation in the case of a gold loan is minimal. Some of the documents can include ID Proof, Address Proof, and two sets of photographs.
Also, you are free from the trap.
You don’t need to bother with your credit score, income proof. This is because gold jewels are kept as collateral with the lender.
Eligibility Criteria :
Before sanctioning of the gold loan, various factors need to be taken into consideration :
- The age of the applicant can be between 18-65 years
- The value of gold ornaments should be 18 carrots and more
- Having an authorization over gold jewels is very important. The gold jewels must be owned by the borrower or the family member.
How does gold loan work?
While obtaining a gold loan, you can pledge your gold to the financial institution for a limited period and get it later. In other words, many institutions offer specific gold loan schemes, and for that, they evaluate your gold and go through the documents and sanction the loan amount. Once you pay the principal loan amount along with interest then you can get your gold back.
Benefits of availing a gold loan
- Keep your gold safe
By availing a gold loan, you will be putting your saved asset to work. When the gold is taken, then it is also insured with the lender, so if your gold is lost or theft, then the lender will give your total amount of money back.
- Easily available
The procedure for applying for a gold loan is straightforward. You need to go to a financial institution that offers such loans and fill up the application form and submit your KYC documents, PAN card, and address proof to avail of a gold loan.
- Credit score
Even if your credit score is low still you can avail of a gold loan. In this loan, the gold is kept as a mortgage, so the risk is reduced from the side of the lender. Thus, the lender focuses on the purity of gold, not on your CIBIL score.
- Flexible payment options
One of the most significant advantages of availing a gold loan is that you get flexibility while repaying it. Either you can pay the monthly interest and refund the principal amount at the end of your tenure, or you can pay the total sum of the amount after your tenure.
- Flexibility of usage
Unlike home loans or other loans, there are no such restrictions on the usage of the gold loan. Once the money is transferred into your account, then it does not matter how you use it.
- Low-interest rates
Gold loans are protected against the collateral, so the interest rates are way lower than personal loans. Generally, the interest rate varies from 12% to 14% per annum in India, which makes it the most affordable kind of loan.
- A Hedge against Inflation
Acts as a hedge against the gold loan
If we currently notice the current trend of our market economy, there is always an upward surge. We have experienced inflation. With the market is rising at the same time, the prices of gold are also appreciating.
Generally, they have a diversified investment portfolio. Well, gold ornament can add as a bonus in such a stance. Gold can be helpful as it can act as a diversifying investment tool for your portfolio.
- Minimal processing charges
Mostly financial institutions levy low fees or no charges for processing the gold loan. There are no foreclosed or hidden charges, so you don’t need to worry about paying more.
If you want to take a loan without affecting your finances, then taking a gold loan is the best option for you. These points, as mentioned above, may help you to make your mind for availing of a gold loan.
Charges of Gold Loan
We mustn’t hide anything from you. The various forms of costs can include processing fees, documentation charges, and overdue handling charges. Also, there are certain foreclosure charges applicable at the time when we want to close the loan. In case you wish to renew the loan, a certain amount of renewal fees is also suitable.
The gold ornament that we possess is a potent tool. We can invest it in many forms.
Being an intelligent investor, you will often make a smart choice: Here is the list of the way by which we can invest in gold :
- Gold Futures
- Gold Coins
- Gold Companies
- Gold ETFs
- Gold Mutual Funds
- Gold Bullion
- Gold jewelry
Every investment is good in its way. However, it entirely depends on your roles, goals, and choices — some of the people who are conscious of having physical proof of their gold investments.
Bullions, coins, and pure carat gold jewelry is the best option in such a case. On the other hand, if your core goal is only making a profit, a virtual form of gold, including ETFs, can be a desirable option for you.
Many times people are offended by the thought that their gold will be taken from them. However, this is not the case; in case you are making a gold loan, you are selling the gold ornaments; instead, you are only pledging it in return for money. After payment of the loan, you can get access to your gold jewels.
Eligibility for Gold Loan
AGE: The borrower is most suitable with the age of 18-65 yrs of age
Quality of gold: The gold of 18 carrots and more is only considered of appropriate quality
Owner: You must be an owner, or in other cases, the family members are signed as a co-signer.
Gold loan in case of rural areas
There is no restriction.; Anybody can avail of a gold loan, be it urban area or rural area. For those in a rural area, NBFC can act as a surale form of the option.
Benefits of taking a gold loan from an NBFC :
The significant advantage acts as you only have to pay the interest rate regularly, and the principal amount can be paid at the end of the tenure. Plus, there are no processing charges and a prepayment penalty.
1)Is partial or half payment allowed?
Such a medium is allowed, but the gold will be given back to you only after complete payment is made.
2)Can we prepay the loan?
Yes, the prepayment of the loan can be done. Timely payment is good. Also, it won’t involve any charges.
Are you planning to invest in a Gold Loan?
Make a smart investment decision and choose a bright investment plan. The best approach would be to consult a financial advisor. Self-study and research are also good. Undergo a good comprehensive comparison of different gold loan schemes for different banks. Make informed and conscious business decisions.
The gold loan comes with a lot of perks. It is an asset for you and an excellent source of investment. It can involve a flexible repayment option, a hassle-free process, a minimal amount of documentation. Don’t wait and pledge your gold against good returns.