Gold Loan FAQ
Before applying for a gold loan, you need to learn more about what they are and how they work. We have compiled a comprehensive list of gold loan frequently asked questions to help you out:
What is Gold Loan?
Also referred to as ‘Loan Against Gold’ is a type of secured loan that a person can avail by keeping their gold ornaments as collateral security with the lender. Unlike other secured loans like car loans or home loans, a gold loan can be used for any purpose.
How does Gold Loan work?
The gold loan works like any other secured loan, you submit your gold along with the required documents with the lender. The loan amount, rate of interest, and other terms are then decided based upon the valuation of your gold. Once everything is finalized your gold is securely locked away and the loan amount is either transferred to your bank account or given in cash.
Personal loan or loan against gold which is better?
A loan against gold is better for 3 major reasons.
- The Rate of Interest charged is much lower than the interest rate on a Personal Loan.
- To get money against gold is very easy and fast. From the time you walk into a branch, the total time required for getting your money transferred to your account or to get cash is as low as 60 minutes.
- The Loan Against Gold’s eligibility is independent of your income and credit history, which means that anyone and everyone is eligible for it irrespective of whether he or she is employed or not.
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What is gold loan interest rate?
Gold loan interest is the monthly amount a borrower pays in addition to the principal loan amount. Different banks and financial institutes offer different rates of interest. On average, this rate varies between 7% to 15% per annum.
Do I need to create a savings account for a loan against gold?
This depends on the bank, as some bank’s might require you to have an account with them.
What happens If I don’t pay back the loan amount?
Missing out your gold loan payment will lead to a decrease in your credit score which will create problems to avail a loan in future and also will make you liable to face legal actions by your lender. These legal actions may include prosecution under the law, extra charges and fines, confiscation and auction of your gold. You should always pay back the loan on time and in case you are unable to do so because of some reason, then you should inform your lender of the same and ask for relief.
How much Gold Loan can I get per gram?
Depending upon the purity of your gold, banks offer gold loan between Rs. 1880 to Rs. 2700 on per gram of gold.
How is Gold Loan calculated?
The gold loan amount depends upon the purity and quantity of gold and the current market gold rate. The rate of interest is then calculated based upon a number of factors including loan amount, loan tenure, relationship with the lender, and loan to value ratio.
How much Gold Loan can I get?
Most Banking and Non-Banking institutes offer gold loans with an average LTV ratio between 65% and 75%. Which means customers can avail a loan amount of up to 75% of their gold’s market value. The loan amount varies from bank to bank and depends on the purity of the gold offered by the applicant.
How to renew a loan against gold?
When the loan tenure is about to end, the borrower needs to visit the bank along with all the documents and the agreement of their present loan. The bank evaluates the gold stored in the locker on the basis of current market rates. The borrower then needs to fill a renewal form and pay a minimal renewal fee. This fee varies from bank to bank. The loan is then renewed.
What is the gold loan valuation?
Gold loan valuation is the process that is carried out at the lending bank’s branch by an authorised evaluator. The bank evaluator carries out the valuation of your gold through multiple processes and determines its market value. Based upon this valuation, the bank offers you the maximum loan amount you can avail and also quotes a rate of interest. You can also connect with us on +91 77180 55547.
How to repay the loan against gold?
Gold Loan can be repaid by regular EMI option in which the EMIs include both the principal and interest amount. You can also repay only the interest amount as EMI of your loan and the principal amount can be paid in full at the time of maturity.
Customers can also make partial payments of their interest and principal amount as and when they are able to. Another repayment option that banks provide is bullet repayment, in this process, you have to repay the entire amount of the loan including both the principal and the interest at the end of the loan’s term.
When does the loan against gold become NPA?
When a borrower fails to repay their loan amount for a long period of time, the bank lender marks it as a Non-Performing Asset. A lender would usually allow one or two slip-ups in loan repayment but if it continues even after three consecutive months, it is marked as NPA and this bars the borrower from getting future loans.