A Gold Loan is the best option for a financial need and crisis. The loan is secured and offers excellent deals. However, a gold loan has multiple features that require adequate research and knowledge before availing one.
What is a gold loan, and How does it work?
Banks and Non-Banking Financial Companies(NBFCs) provide loans to customers upon receiving gold asset(s) collateral. And thus, a gold loan is secured and has maximum protection. A gold loan is a general-purpose loan, where the bank or the financial institute doesn’t raise questions on a borrower’s reason for availing. Therefore it can be used for any and all reasons. Medical emergencies, inexplicable financial crises, educational needs, home renovation, construction, business reasons, vacations, weddings, technological and electronic gadgets, machinery purchase, the list goes on forever. No matter how big or small the value of reason is, a gold loan is present to help you. Upon pledging the gold asset, the value of the gold is determined based on its purity and weight of the gold. And the loan amount is granted for a certain period. The borrower needs to pay back the owed amount with interest by the end of the tenure. The loan can be availed both online and offline conveniently.
Gold Loan features:-
- Easy Processing:- Compared to most other loans, a gold loan has the most convenient and flexible processing. This is because a gold loan only requires the minimum amount of documents. With two photocopies, a valid id proof such as a PAN card, Voter Id, Aadhaar Card, Driving License or Passport, and Gold article(s), you can avail of the loan within several hours.
- Swift Accessibility:- A gold loan can be availed both in online and offline modes. In the conventional face-to-face way, you can just walk into the bank or NBFC and submit the required documents with collateral, and the loan amount is disbursed on the spot. However, upon choosing the online mode, you have to fill an application form and upload the required documents in addition to the required loan details. After the application submission, the bank or financial company calls you for further processing. Both the methods are effortless and have proved to be extremely beneficial over the years.
- Loan Amount:- The loan amount sanctioned is based on the value of the gold. The purity of the gold is required to be in the range of 18 carats and 24 carats. Authorized lenders don’t accept gold with purity less than 18k. The higher the purity of the gold, the higher the loan amount granted. The weight of the gold must be a minimum of 10gm in a few banks and NBFCs, but most other lenders accept gold of any weight. The Gold loan per gram for most banks lies in the range of RS 3,506 and RS 4,621.The loan to value ratio is up to 90%, so if the value of the gold asset pledged is RS 1 lakh, the amount sanctioned is a maximum of RS 90 thousand.
- Loan Term:- The period the loan is granted for is known as loan term or tenure. The gold loan tenure varies from 3 months to 36 months. The interest amount has to be paid till the end of the chosen tenure. Therefore, choosing the tenure you can afford is primary. Generally, a long tenure has a low interest rate, and a short tenure has a high interest rate.
- Interest Rate:- The interest rate is a percentage of the loan amount availed. The interest rate is a primary aspect of the loan and needs to be paid on time without default. As the loan is secured, the bank or NBFC has the right to auction your gold if you as a borrower don’t pay interest amount continuously for more than three months. The interest rate of a gold loan is extremely minimal compared to other loans and starts from 7% per annum.
- The Processing Fee and Preclosure Charges:- Banks and NBFCs charge fees for the processing and approving loans. The gold loan processing fee is NIL in most banks and NBFCs, but some charge a rate of 1% of the loan amount. The Preclosure Charge or the prepayment charge is incurred if the borrower wishes to close the loan account sooner than the end of tenure.
- Conclusion:-
Muthoot gold loan is a highly renowned gold loan with the best deals and offers in the market. The financing company often introduces various schemes on gold loans for its customers. The financial institute is highly reliable and trustworthy.
Must Read:- How gold loan can reduce risk of loss
