Various banks and non-banking financial companies (NBFCs) throughout India offer gold loans to their customers at competitive interest rates. However, before a Gold loan applies online, you should be aware of the process, advantages, and disadvantages discussed further in this article.
Here are a few things to remember before taking out a loan against your gold.
Banks vs. non-bank financial companies (NBFCs)
There is one significant distinction between banks and NBFCs. The former has lower interest rates and allows NBFCs to lend more significant sums. How do they manage to do it? They put a higher value on your gold than banks do.
You have the option of paying in equivalent monthly installments (EMI) or just paying interest over the term of the loan and a one-time repayment at the end.. Banks and non-bank financial companies (NBFCs) sell the borrower 75% of the gold's worth. If your gold is priced at $46,500 for 10 grams by a bank, the NBFC will value it higher.
There are also several slight variations. NBFCs that mainly lend against gold, for example, will provide loans quicker because they value the metal in-house. This facility may not be accessible in all bank branches, and they may need to employ a valuer to get it.
Lenders disapprove of gold bars
Lenders consider 18 carats of purity as a minimum. Many lenders would not accept gold that is less pure than this. Also, many lenders would not lend against gold bars. You may, however, pledge jewelry and gold coins. Bear in mind that the lender would not accept the jewelry’s value, whether it contains diamonds or gems. They can only lend money if it is secured by gold.
Charges
Prepayment penalties are not typical among lenders. And if only a few people tax it, it would only amount to around 1% of the unpaid balance. There may also be fees for valuation and delivery. Allahabad Bank Gold loan also charges a negligible amount to its clients.
Return of funds
Depending on the projected cash flows, you can select from a variety of repayment options. You have the option of paying in equivalent monthly installments (EMI) or just paying interest over the term of the loan and a one-time repayment at the end.
Failure to pay
Lenders have the right to sell your gold if you don't pay the loan on time. Besides, if the price of gold falls, the lender can ask you to pledge more gold. The lender would like to keep the loan-to-value ratio constant, which means that the gold they have should be worth more than the money they have disbursed.
FAQs
Do I need to have some proof of income to get a gold loan?
You don't need to request any evidence of income or wages to get a gold loan because banks and non-financial institutions provide a Gold loan to apply online facilities with just a few pieces of identification and proof of address.
Is it necessary for me to be a current customer of the bank to get a gold loan?
To obtain a gold loan, the borrower does not need to be a bank’s current customer. Gold loans are issued based on a gold mortgage. If a Gold loan applies online with your current bank, you can quickly negotiate interest rates depending on your relationship with the bank.
What are the conditions for obtaining a gold loan?
To apply for a Gold loan online, you'll need to identify and address proof such as a PAN id, passport, Aadhaar card, voter id card, and utility bills. Besides providing the required documentation and the gold asset, you must also meet the banks' basic eligibility requirements for granting a loan, including age, occupation, gold value, and so on.
Also read this: REASON FOR INCREASE IN GOLD LOAN