ARE BANKS ASKING TO PLEDGE GOLD FOR SAVING LOCKER RENT
If a person has an emergency medical bill to settle and needs Rs 5 lakhs, and if he faces a shortage of Rs 3 lakhs, then taking a gold loan can be a good alternative. If the person already has a good bond with the Bank, then the bank relationship manager can help by giving an unusual gold loan scheme that can save a good amount of money. The bank can offer the remaining amount to the person if he surrenders the locker he has with that Bank and thereby apply for a gold loan. The surrender of the locker can save annual locker charges of at least Rs 8000 and can supply him the amount that he requires to meet his expenses. The person used the locker to keep the gold safe; now, he can get a gold loan instead of it.
After the covid-19 pandemic struck, gold loans have become vastly popular among the masses even after the prices of gold touched Rs 50,000 per 10 grams. Observing the appetite for Gold loans in the Indian loan market, the Reserve Bank of India also permitted the Banks to deliver gold loans to their customers at an enhanced loan to value ratio. The RBI allowed the loan to value ratio against gold loans at 90% of the value of gold pledged until 31st of March 2021; it again came back to the conventional 75%. Enhanced loan to value ratio means getting an additional amount of loan against the exact amount of gold.
A bank locker is considered a safe storage place for multiple items, mostly assets like gold ornaments, diamond jewellery, articles or jewellery made of silver or legal documents like a will or insurance policy. Gold loan against Bank lockers can also be forfeited if the person fails to repay the loan. The banks can have the malafide intention of taking away the accumulated Gold jewellery of a middle-class borrower. A person holding a bank locker needs to expend a nominal amount as annual rent. In contrast, in a gold loan, the liability of paying the loan back cost heavily upon the borrower.
Sometimes the lending institution can offer gold loan overdraft schemes at nominal processing fees and even facilities like pay only interest when a customer utilises the overdraft facility. The interest rates on gold loans can start from 7.4 per cent, and the monthly instalment that a person needs to give against a gold loan every month can be evaluated in a gold loan calculator. If a person does not use a credit facility, they benefit from paying less to the bank against the locker charges if he had used it to store his assets, especially gold.
Banks generally push the customers to have a gold loan scheme in the bank overdraft facilities where a person needs to keep their ornaments secured with the bank to take a gold loan overdraft facility. This further provides insurance on the pledged gold and saves the cost of renting an individual locker. But many customers fall into a debt trap when they give up their locker facility and take credit lines from the lending institution. On the other hand, Manappuram gold loan rate or gold loan from any other bank has numerous benefits and flexible repayment options that can be profitable compared to a gold loan against a Bank locker. If the borrower defaults in paying back the loan amount, it will not only auction off the pledged gold jewellery but also hurt the borrower’s credit history. The banks will make good of their loss if a loan turns into non-performing assets through this auction. The experts always recommend getting a gold loan only if there is a financial emergency, as the jewellery pledged does not have any utility value.
Also Read:- Why is the Gold loan profitable?
