June 16, 2024

Backet Hat

Just another WordPress site

8 Tips for Taking a Gold Loan in India

Gold jewellery, bars, and coins are the most preferred investment avenues in India. Many people consider gold a hedge against inflation. This means that investing in gold could protect an individual from the depreciating value of the currency. Most Indians prefer to take gold loans from a bank or non-banking financial company (NBFC) because it acts as immediate capital. This type of loan can be approved within a few minutes and disbursed in lesser time into the borrower’s bank account. Another benefit of a gold loan is that the borrower does not have to explain the nature of their expenses while applying for this loan. Also, gold provides easy liquidity based on an asset. So, the asset that was otherwise lying dormant in the bank lockers can be liquefied easily. Here are some essential things that you need to know before taking a gold loan from a reliable financial institution:

1. Eligibility for a Gold Loan

Applicants do not need to fulfil inflexible rules to be eligible for this secured loan. A businessman, a trader, a farmer, a salaried person, and a self-employed individual can take a gold loan. However, the applicant should be an Indian resident between the ages of 18 to 75 years. Alongside this, the borrower should have a particular amount of gold in the form of ornaments or gold coins readily available. 

2. Documents Required

If you wish to apply for a loan against gold then you should keep the following list of documents ready:

  • Passport-sized photographs
  • PAN card
  • Or any other identity card such as a passport, driving license, voter ID card or Aadhar card
  • If you are a farmer, you would require Agri-allied occupation documentation

3. Purity of Gold

The purity of gold is measured on the basis of karats. 24 karat is considered as the purest form of gold without any addition of other metals. The lender evaluates the purity of the gold that you are willing to give as collateral. If its purity matches their standards, only then your gold would be eligible for the loan. While planning to make an investment in gold coins, jewellery items, etc., make sure that they have specific hallmarks or certificates authenticating their purity. 

4. Gold Loan Repayment

A person can repay the loan with easy monthly instalments or EMIs. These instalments are calculated based on the value of the gold and the rate of interest. To get an idea of how many EMIs you will have to pay in a certain period of time, you can also take the help of a gold loan EMI calculator online. It would be best to make your repayment on time. 

5. Non-Repayment of Loan

If a person does not repay their loan to the lenders, then regular reminders will be given to the borrower. These reminders will be sent via emails and text messages to intimate the borrower regarding payment of EMIs. If there is still no response from the borrower, the lender may impose additional charges. Later, if the loan is still not paid after repetitive follow-ups and reminders, the bank may take strict action. In due course of time, they will proceed to sell or auction the gold. 

6. Need for a Third-Party Guarantor

A guarantor is a person that gives or acts as a guarantee for the lender when a loan is taken from a bank or NBFC. In the case of a gold loan, you do not require a guarantor. Thus, the process of getting approved by a financial institution is easier. 

7. Tenure

It is essential for all borrowers to repay the loan amount with interest within a set time period known as tenure. It is recommended to choose a trusted bank or NBFC that offers a longer tenure so that you do not face any financial crunches. If you have ample time to repay your loan, the process will not be burdening for you. 

Be it jewellery, coins or bar, gold investments can be easily used to take a loan in times of emergencies. Look for the most beneficial schemes that renowned banks and NBFCs have to offer, and compare them to get the most suitable option for you.