What Exactly Is A Gold Loan And How Can One Apply For It?

What Exactly Is A Gold Loan And How Can One Apply For It

Undoubtedly, gold comes among the most liquid commodities as well as a good investment. Indian households are the biggest reserve of gold across the whole world which measures up to nearly 24,000–25,000 tonnes. Furthermore, due to its reliability, it is also the best borrowing asset. Hence at present, you get so many sources that offer gold loan plans which anyone can avail easily. Let us learn about gold loans in detail and how you can apply for them. 

What Does a Gold Loan Mean?

A gold loan is a credit amount that a borrower receives from the bank or any other lending source in exchange for their gold assets. A borrower gives their gold holdings to the respective gold loan provider as a security deposit until they repay the loan amount with interest. 

Borrowers can bring any gold asset for collateral: gold coins, biscuits, jewellery, or anything else. You will get the loan amount that covers 60-70% of their current market value with these assets. 

Further, while determining the sum of the loan, your loan provider will consider the following aspects:

  • Present gold market worth
  • The creditworthiness of the applicant
  • The total weightage of the gold, excluding stones and metals

Additionally, the purity of gold affects the interest rates on gold loans.

How to Apply For a Gold Loan?

It is a fact that gold is usually stable in terms of market value and tends to be less stable compared to other forms of investments. This quality makes the applying procedure simple and easy. There are two ways you can avail of a gold loan. Firstly you can consider an online gold loan, and secondly, you can give a physical visit to the loan provider with all the documents. 

For the offline procedure, you need to go to the financial institution to submit all the documentation and your gold assets. Additionally, borrowers need to have valid ID proof. 

On the other hand, for an online gold loan, you need to provide your personal information like phone number, address and others on the online form. On approval, you will be directed to any close by the branch where you have to give away your gold ornaments. 

For gold loans, borrowers do any Guarantor or certificates. 

Factors Affecting The Interest Rate Amount on Gold Loans: 

  • The principal amount of the gold loan.
  • The tenor of the loan.

However, the final gold interest rate will vary depending on the type of loan scheme you are taking. You will find different schemes for business, first-time borrowers, personal purpose and even different schemes for ladies. 

Use of EMI Calculator

You can find a loan EMI calculator on the website of your loan provider. Here you can easily find the possible monthly instalment for your loan amount under which scheme you have taken. To use it, you need to provide values of the approved loan amount and duration. 

You need to follow the instructions that the online EMI calculator asked you to.

Though the interest rate depends upon the type of loan scheme, in most cases, loan providers charge interest rates between 12 to 24% per year.

Apart from banks, many NBFCs offer some of the best plans on gold loans in India. Further, they will also assist you in getting different kinds of loans like personal or home loans. The interest rates are usually lower in such loan provider companies. However, it is always better to compare different options before settling on one.

In Indian households, gold loan plans have always been a preferred choice when needing financial support. 

Bajaj Finserv, through its lending and investment arm, Bajaj Finance Limited offers gold loans at affordable interest rates. By pledging your gold assets, a borrower can avail of a loan of up to Rs. 1 crore to meet their requirement.

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