Gold has become a precious metal for beautiful jewellery for popular investment instrument in India. Likewise, when anyone need cash urgently for their business needs, unplanned expenses, or medical emergency he/she can take out a Gold Loan and fulfil their needs on their own. Gold loan is a type of secured loan availed by the borrower from a lender by pledging their gold articles (within a range of 18-24 carats) as collateral. The loan amount sanctioned is a certain percentage of the gold varying up to 80%. It depends on the current market value and quality of gold. Gold Loan is also known as Loan again the Gold.
The process of gold loan is quite same as other secured loans. In Gold loan, one can take his/her gold articles to a lender along with the required documents. The lender assesses the gold articles and validates the submitted documents. According to the evaluations, the lender sanctions the loan amount. Per the loan agreement, one can pay off the principal amount with with the interest amount and get the pledged gold articles back.
Anybody who has gold can avail a gold loan. Gold loans can be availed by any Indian resident, that include salaried professionals, businessmen, housewives, and even farmers. Even if anyone don’t have descent credit score to be eligible for a gold loan, they can get this gold loan by pledging their gold.
The pre-closure period or gold loan tenure differs from one financial institution to another. It generally ranges from 3 to 12 months. Some lenders or financial institutions offer a longer tenure depending on the case or allows the borrower to renew it to extend the tenure. Since the tenure of the gold loan is shorter when compared with other types of loan, one should make sure that he/she repay the loan amount on time to avoid losing the gold forever.
Advantages of Gold Loan:
- Low interest rates and minimal processing fees.
- Minimum documentation.
- Low or no loan pre-closure charges.
- Flexible repayment tenures.
- High LTV ratio.
Disadvantages of Gold Loan
- LTV fluctuations may lead to loss to borrower
- If anyone doesn’t able to repay the loan or it goes to default, there is a chance of loosing the borrower’s gold permanently.