Blog #HDFC Gold Loan

A loan is an advance made by a lender in favor of an individual who is obliged to repay the amount after a specific period. There are numerous types of loans. Every financial institution has different policies regarding credit matters.

Selecting a credit plan can be quite a dilemma for a person. If someone is considering taking a loan, only a few things need to be kept in mind. 

1. Amount and duration of the loan:

The first and foremost step of selecting a credit plan is calculating the amount that is required. Selecting a plan that offers more credit than required is a foolish decision. Also, the duration for which the plan is selected must be sufficient enough to make the repayment. If you take a loan and are unable to repay it within a time you will be answerable to the lender. For example, if you take a gold loan from a bank for one year and you fail to repay the amount, the lender has the right to sell off your gold articles kept as collateral. In the case of unsecured loans such as personal loans, non-repayment of debt will not be considered a criminal offence but the person who made the error of payment will be declared a defaulter.

2. Rate of interest and processing fee:

When you repay a loan, a certain extra percentage of the principal amount is charged as interest. The rate of interest differs from loan to loan and in the case of unsecured loans, it is comparatively much higher. While applying for a loan, the rate of interest is an important factor to be kept in mind. Since it is a natural human tendency to avoid unnecessary spending, choosing a plan with low interest rates is logical. Gold loans have relatively lower interest rates. For example, the HDFC Gold Loan scheme offers an interest rate of 7.0%.

The processing fee is charged during the loan registration process. Personal loans have a processing fee of Rs. 2500 regardless of the principal amount, whereas gold loans have processing fees with respect towards the borrowed amount. For example, a bank charges a processing fee of 1.50% of the principal amount.

3. Availability of credit within desired time:

Situational circumstances can compel someone to take quick measures. If an unfortunate event occurs and a sudden need for a huge expense appears, credit can be a huge assistance. But most loans take days to get certified. The best option for these situations is a gold loan because they can be availed within hours. This is one of the major benefits of gold loans. People don't have to wait very long to receive a gold loan.

The Gold Loan Interest Rate and eligibility criteria are also different from other loans. Gold loan eligibility criteria are comparatively simpler. Any person of 18-years to an age of up to 75-years can apply for a gold loan with the required documents (Identity and Address proof) and their gold articles. Other loans are different. To apply for a other loans you need numerous other documents such as proof of income, and you must have been an employee for a specific time.

Your credit score is also considered while deciding whether your loan will get cleared or not. After considering all these factors it is clear that applying for a gold loan is a much more logical option. Other loans can be quite beneficial as well but not for every citizen. Gold loans provide an equal opportunity to all people regardless of their financial status.

Conclusion:

While deciding which credit facility to choose from, we must decide which course of action will yield maximum profit. Not everyone would feel that gold loans are better than other loans but for most people, gold loans are extremely beneficial. This is the reason gold loans have more demand.


Read More:- HOW GOLD LOAN MORATORIUM PERIOD CAN BE INCREASED 

A secured loan or secured debt is when the borrower has promised to give the moneylender certain belongings (assets), such as a car, gold jewellery or coins, if the borrower defaults on payments, i.e. fail to repay the money. The lender has the right to confiscate the belongings and sell them to recover the loss.

The property the borrower puts up as security is named as the ‘collateral’ on the loan.

If after selling off the collateral the amount does not cover the debt amount and interest amount, the lender may try to get a deficiency judgment against the borrower for the money needed to cover the loss that the lender couldn't recover.

Why is Gold Loan secured Loan?

1) A person seeking to get a Gold loan has to put up the Gold as collateral so that if the person is unable to pay back the amount, the Gold (ornaments or coins) can be sold to recover the loss thus making it a secured loan.

2) Moreover, since 100 per cent of the value of the Gold is not given off as a loan, even if the borrower defaults, the moneylender can recover the interest amount as well by selling the Gold.

3) Banks usually give 75 per cent of Gold's value as a loan whereas the Non-Banking Financial Corporations give up to 90 per cent of the value of the Gold as a loan.

4) But the banks offer loans at lower interest rates while the NBFCs charge higher interest rates. So it highly depends upon the amount you are willing to avail as a loan and the Gold you have or you are willing to pledge against your loan. There are a lot of secured loan products on the market such as HDFC Gold Loan, IIFL Gold Loans etc. which are offered at low-interest rates.

5) In the case of unsecured loans, like in the case of credit cards, the lending Organisation has no asset to sell so they can recover the loss if the borrower defaults.

6) The risk for the lender is lower in the case of secured loans thus secured loans have lower interest rates compared to unsecured loans. Although there are other factors also that determine how much interest the lender will charge, including the borrower’s employment stability, credit history, ability to repay etc. However, all of this is not checked in the case of Gold Loans.

Benefits of secured loans-

a) Low cost

Although you won't have to pledge collateral to get an unsecured loan, they come at a higher cost. Their interest rates are usually higher, their processing fees are generally high, they also most of the time charge for foreclosure. Pledging an asset gives assurance and a sense of relief to the lender that even if the default is made, they are not at any loss! As this reduces the risk considerably, the cost is lower in the case of secured loans.

b) A longer-term and larger amount 

In a secured loan, the borrower is also a profit as they have the option for a longer repayment period, huge loan amount etc.  The amount you will get against your gold depends upon your Gold's value. The higher the value, the greater the loan amount you could get against it. 

c) CIBIL score not needed

Since security has been pledged, it lowers the dependency on the CIBIL score because the amount recovery can be done by selling the security. In the case of other loans, CIBIL score is a very important factor that determines whether you'll get the loan or not.

You can compare the different loan products based on repayment methods, tenures, cost using the Gold Loan calculator tool provided by different websites and choose the most appropriate one for you.  It also depends upon the type of asset you hold. But before availing of any loan, whether secured or unsecured, never be in a rush and take your time to compare, calculate the pros and cons of each product offered by different banks or Non-Banking Finance Corporation and then make a conscious decision like an informed consumer.

Also Read:- HOW GOLD LOAN IS IMPORTANT 

In India, the spread of Covid-19 has resulted in a severe financial shortage. While it is always good to conserve money so that you may utilise it when you are short on cash, one of the methods to get cash during Covid-19 is to take out a gold loan. Most lenders or lending organisations, such as Banks, Financial Institutions, NBFCs, local lenders, and others, offer gold loans in which a sum of money is lent to the borrower in exchange for gold ornaments held as collateral deposit with them. People in financial distress frequently use gold loans to cover their needs while maintaining gold as collateral with the lending organisation.

Gold Loans are one of the most straightforward solutions to overcome financial challenges by simply having your gold jewellery evaluated and borrowing up to 75% of the gold value, depending on the current market rate and weight of the gold. The increasing risk  among lending institutions, as well as the high level of uncertainty brought on by the covid-19 outbreak, has boosted people's willingness to take out gold loans. Due to the implementation of strict lockdown in most states, those who own small enterprises or work on a regular basis are at risk of losing their jobs.

Because unsecured loans such as personal loans and group loans are not available due to the global uncertainties, gold loans are in high demand. Due to the outbreak of the covid-19 pandemic in the financial year 2020, credit growth in this industry fell, while gold loans resisted the trend. The cost of repaying a gold loan is also minimal because the debtor has the option of repaying the principal at the end of the loan repayment period and simply paying interest during the repayment period. During the shutdown in April and May, banks and financial institution's operating hours were restricted, resulting in a lower disbursal take-off. The  future Gold Loan demand will be determined by a number of factors.

Gold loans will remain a popular form of funding because they are easier to obtain than other types of financing. Learning institutions were only allowed to issue 90% loan to value or LTV ratios after the Reserve Bank of India granted a special dispensation, but this concession expired on March 31st. According to official Reserve Bank of India data, most people get gold loans by pledging their household gold reserves to borrow money for essential expenses and medical emergencies after the lockdown caused job losses, wage cuts, and business closures. Gold Rate Today for 10 gram of 24 carat gold is Rs. 48,760. The bank may not take more than 72 hours to disburse the loan amount to your bank account after you have pledged your gold ornament and submitted the required documentation together with the application form. This means you can collect your loan money as soon as possible and meet your financial obligations.

On Term Loans, Overdrafts, and EMI-based loans, HDFC Gold Loan offers reasonable interest rates. Repay your loan over a tenor of your choice with cheap EMIs. Before applying for a gold loan, make sure you evaluate the numerous gold loan plans available to find the one that best suits your needs. After you've compared and decided on the plan you want, you can apply for it either online through the bank's website or in person at the nearest lender's branch.

Must Read:- Eligibility Criteria For Gold Loan 

WHAT IS A GOLD LOAN?

A gold loan is a loan that one can avail of from a bank. It is a secured loan which means that when a person wants to take a gold loan, he needs to pledge his gold articles as collateral or security. The gold will be kept safely by the bank or by the moneylender, and after the successful completion of the loan and the repayment of the EMIs, the gold that the borrower pledged is given back to him. In this loan, the loan amount depends on the market value and the purity of the gold rather than the source of income. If a person is not earning at the time of availing of a loan, the bank can also accept his application.

WHAT IS AN INTEREST RATE?

When a borrower takes a loan from the bank, he has to repay the loan to the bank or the moneylender with interest after the disbursal of the amount of money. This is how the banks make money. So, when a person takes a gold loan from a bank, he will need to repay the loan with the gold loan interest rate. The interest rate varies from bank to bank and from one moneylender to another. Some of the banks offer lower interest rates on the gold loans that they provide. 

BANKS THAT CHARGE THE LOWEST INTEREST RATES ON THE GOLD LOANS STARTING FROM 7%: - 

The gold deposited by the borrowers support the gold loans, and therefore, they do not require high-interest rates. The time taken to disburse the loan is very little as compared to the other loans.

The following are the top five banks that charge the lowest rate of interest on the gold loan: -

• Punjab and Sind Bank: - The rate of interest offered on the gold loan is 7%.
  
  
• Bank of India: - The rate of interest offered on the gold loan by the Bank of India is 7.35%.
  
  
• State Bank of India: - The interest rate on a gold loan offered by the State Bank of India is 7.5%.
  
  
• Canara Bank: - The rate of interest offered by the Canara Bank on a gold loan is 7.65%.
  
  
• Union Bank: - The interest rate on a gold loan offered by the Union Bank is 8.2%.

FEATURES OF A GOLD LOAN: -  A gold loan is one of the cheapest and the most hassle-free loans. A person can get immediate cash. The money lenders or the banks do not require high credit scores. The time taken to disburse a gold loan is also less as compared to the other loans. 

Following are some of the features of a gold loan: -

• Tenure: - The banks issue the gold loans for tenures of upto twoIn addition, the years. You can renew the loan after that tenure.
  
  
• Collateral: - In a gold loan, you have to keep your gold as collateral or security to the bank. The banks can offer upto 80% of the value of the gold as the amount of loan. The higher the loan to ratio value, the higher will be the rate of interest.
  
  
• Repayment: -  A person gets flexible repayment options to repay a gold loan. He can either go for a regular EMI option or the bullet repayment method. In the case of a gold loan, partial payment is also available HDFC gold loan offers flexible options.
  
  
• Credit score: -  You do not have to worry if you do not have a credit score or a good credit history. Your loan application will be accepted if you have a low credit score.
  
  

Documentation: -  The documentation process involved in a gold loan is really easy and minimal. There are not many documents required, just the basic ones such as identity proof, address proof, etc. In some of the banks, income proof is also not needed to apply for a gold loan.

Must Read:- Simple Tips To Avail Gold Loan 

One of the major reasons people find it convenient to go for gold loans is its affordable rates of interest. So, now we are going to talk about various aspects that are involved in the availing of gold loans. So, let me tell you that there is not much difference between gold loans offline and gold loans online. It is just that under gold loan online, one has to do the same procedure that they would do by visiting a bank branch under the offline gold loan. You can avail of a loan against the gold that you once bought or made an investment in and use it for your urgent need for funds. Gold loans have many benefits because they have gained a lot of prestige in the market and have become popular amongst people.

So, let us discuss the process of getting a gold loan, so the steps are as below:

1) Gold loan application:

The first step in this process is to opt for a loan amount that you would want from the lender, various institutions offer gold loans, and before going to one of these, you should make sure that you have compared different banks and lenders and choose the most suitable one for this process. There are two methods for the application process, that is, online and offline. For the online process, you need to go to the website of the bank or lender and apply for the loan there, whereas, in the offline method, you need to go to the nearest branch and fill the application form there.

2) Gold submission:

This is the most important step to get a gold loan; your bank or lender’s website needs to submit the gold ornaments as security or collateral. You must not forget that the submission of gold cannot be made online, so you need to visit the branch and submit your gold.

3) Gold evaluation:

The third step is gold evaluation. Under this process, the lender or bank will calculate the total value of the gold you have pledged. This is determined by the current market value of the gold, and the value of the gold will tell how much loan you will get for the gold pledged. So, it will majorly depend on the value of your gold. One can get a maximum of 90% of the gold value as the loan amount. And the lenders give the amount according to the Gold Loan Per Gram.

4) Documentation process: 

In this process, you will have to submit a few documents to the lender. This involves simple documentation with minimum document requirements such as identity proof, residency proof, income status, passport size photographs, etc.

5) Eligibility, Authentication, and disbursal:

After all the steps are done, the lender checks your eligibility. Each bank and lender has a different set of conditions based on which they check eligibility. These banks' or lender’s website factors generally involve the borrower’s age, purity of the gold pledged, etc. A person with a low credit score can also get a gold loan. After all this, the authentication is done, after which the amount of the loan is disbursed into your bank account. This is the whole process of applying for a gold loan and what is required to get a gold loan approved.

If we talk about a gold loan, everyone must have heard of the name of HDFC Gold Loan as they are quite popular among this line of lending against pledged gold. HDFC can be a really good option for you to get a gold loan as they offer a lot of different schemes to choose from. So one can compare these different schemes on various bases before applying for a gold loan under one of these schemes.

Read More:- Is Gold Loan Rate Is Low 

Method of obtaining Gold Loan - The process of applying for a gold loan is quite simple. The applicant must be of 18-70 years of age. The Gold loan can be acquired by anyone who suffices.

Gold loan eligibility and possesses more than 18 carats of gold. No occupation barrier is there for acquiring gold loans. No credit score for CIBIL score is required for this loan. However, one can improve his/her Credit score by this loan. This loan can be acquired for agricultural processes or travel purposes, wedding purposes or higher education, etc. There is no restriction on the utilization of the loan amount.

 Application process This procedure can be done in two modes—online and offline mode.

1. ONLINE MODE- the applicant can complete the procedure from HDFC bank's official website or app.
2. OFFLINE MODE- the applicant has to visit the bank for completing the application procedure.

The rest of the procedure is the same where the applicant has to visit the bank for document verification and gold's purity test. 

Documentation - There is a lot of paperwork and lengthy documents to be submitted for availing loans. This is not the same for Gold loans. Here only KYC documents are necessary. The verification is done for checking the applicant's background. Identity proof and Address proof, along with 2 passport-sized photographs, are mandatory. For identity proof, one can submit anyone from this- Aadhar card, Driving license, Voter Id, PAN card. For Address proof, one can submit anyone from this- Passport, Aadhar card, Ration card, utility bills, or rental agreement for renters. No other documents than this are not required. When applying for Agricultural purposes, one has to submit proof of agricultural land. 

Purity test of Gold -The gold which has to be kept as a mortgage has to be evaluated. The evaluation is done for checking the impurities present in the gold and its weight and composition. This is called Gold's purity test. Bank representatives conduct the purity test. 

Loan Approval - Once you have completed the application process, document verification, gold purity test, and met the eligibility criteria, your loan gets approved. After approval, a sanction letter is issued to the applicant. A sanction letter contains bank details, loan amount, interest rates, prepayment options, foreclosure charges, loan tenure, repayment options, gold rate per gram, etc. After depositing the Gold in the bank, it is safely kept in bank lockers. 

Safety of gold - When you deposit the gold in a bank, it is kept in lockers. The lockers are present inside the Bank's vault. The gold is kept in bags and marked by the application as no present in your sanction letter. The lockers are guarded and kept under surveillance. The lockers hold durability from external conditions. The lockers have specific keys for all the lockers. The keys own the bank representative. Nobody is allowed to enter the Locker room except bank representatives. 

Repayment The following three alternatives are open for refinancing your HDFC Gold Loan advance.

1. Standing Instruction (SI): If you have a current account with HDFC Bank, an amount indicated by you will be deducted towards the end of the month.
2. Electronic Clearing Service (ECS): This option is for those who don't have an account in HDFC bank; here, the amount indicated by you will be deducted from the account of other banks shown by you towards the end of the month.
3. Post-Dated Checks (PDC): The PDC can be submitted to your nearest branch of HDFC Bank towards month-end.

Benefits

1. The interest rates are only 9.90% per annum which is very less in comparison with other loans.
2. The processing fee charged is only 1.50% of the Principal Loan Amount.
3. No foreclosure charges after 3 months.
4. The loan can be approved up to Rs 1 Crore.
5. Loan tenure is between 3 to 24 months.
6. The gold loan can be obtained in just one visit.
    Also read this: Some Essential Features of a Gold Loan 

Nowadays, a person can easily get a gold loan online by following some simple steps. But it becomes very important that one should have a sound knowledge of how to go about getting these loans. So let us discuss some of the important points on how to choose the right gold loan for you.

Getting a Gold Loan is not really a process involving a lot of hassle or stress; if everything is done precisely, one should do all the steps carefully and check all the criteria twice before getting to a bank to avail of a gold loan. Certain formalities need to be taken care of before getting any type of loan. This completion of formalities may take up a lot of time. Still, as in the case of gold loans, they are easy to avail, so the process can be completed pretty quickly if the requirements are catered to correctly.

First, let us talk about the right eligibility to apply for a gold loan. One should apply for a gold loan only if he can fulfil the eligibility criteria. Otherwise, he may not be sanctioned for the loan, so a person should be self-employed, salaried, professional, businessman, farmer, trader etc. so that he can avail a gold loan, then, he should be able to meet the age criteria that is, the age limit for availing a gold loan should be between 21 to 60 years of age.

What documents should one carry for applying for a gold loan? For applying for a loan, banks and money lenders ask for a lot of documents, but minimal documentation is required in the case of a gold loan. Some of the documents required are stated as below: One should carry their identity proof, which involves PAN card, Aadhar card, and then, current address proof is also very important such as, aadhar card, postpaid bill, landline bill, water bill, electricity bill, address updated in bank statement/ bank passbook, driving license, voter ID, passport, rent agreement, gas bond paper with the latest receipt, credit card statement etc.

What is the tenure for gold loans? As tenure plays a major role in deciding whether one is in the state to apply for a gold loan or not, one should keep this in mind. The tenure for a gold loan is six months, and it can be renewed for another six months without any extra renewal charges. Since the tenure on a gold loan is very short, one should make sure before availing the loan that he will be able to repay it within the stipulated time; otherwise, the gold pledged can be taken if one fails to repay their loan within time. 

Another important thing that you need to know is how long it takes to get your gold loan sanctioned? So, as you may know till now that getting a gold loan is quite easy and simple and if you have all the necessary documents and you are able to meet the lender’s criteria, then getting a loan will no longer be a timely procedure; you can even get a gold loan in one day.

One of the easiest ways to avail of a gold loan with minimal documentation and transparent charges can be through the HDFC Gold Loan. HDFC provides a quick and easy solution to get a gold loan. HDFC bank gold loan comes with a variety of interest rates on term loan, overdraft, EMI based loan etc. One can easily repay them on their own terms of tenure as they provide flexible tenure ranging from 3 months to 24 months. They require minimal documents such as passport, driving license, voter’s ID card, aadhar card issued by UIDAI, PAN card or form 60, a passport size photograph, Agri allied occupation documentation etc. If you are able to present a few documents correctly to the bank, you will surely be sanctioned for the loan in no time.

Also read this: What is the Top-Up Gold Loans Scheme