All You Need To Know About Gold Loan

by Arjit Chalmela Finance Student

Indians love gold. Whether it is a festival or an occasion, Indians tend to buy gold and invest their savings into holding either gold coins or jewellery. This is why one of the most popular loan items in India is the gold loan.

Many lenders have started offering gold loans to people from both urban and rural areas to raise funds for their needs. However, before you apply for loan against gold, here are some features of a gold loan that you need to know about:

Features of gold loan:

A gold loan is a secured loan. This means to get the funds, you will have to deposit the gold physically with the lender. The lender will keep the funds under a secure lock and key till the time the gold loan is completely repaid.

The lender has different purity standards that they accept for a gold loan. Some lenders may accept gold of all purities whereas others may accept only 22 karat or 24 karat. These guidelines may be present on the lender websites.

The entire market value of the gold is not given out as a loan. Only between 60% to 80% of the value is given out. This is called Loan To Value.

One of the reasons why a loan against gold is popular is that it does not require any income documents. Only KYC documents and physical custody of gold is enough to get a loan.

The repayment tenure for a gold loan ranges between 3 months to 24 months depending on the lender.

The repayment schedule of a gold loan depends on the lender. Some lenders offer a standard equated monthly instalment loan schedule. Some lenders allow different repayment schedules like paying interest only till the due date, paying any instalments till the time the payment is due, paying the entire principal and interest on due date. It is better to confirm this with the lender before opting for a gold loan.

A gold loan does not have any conditions attached to it with regards to usage of funds. Except for a few standard negative options like using it for illegal or criminal activities, the funds can be used for any purpose. This makes it very easy to raise funds in case of personal or medical emergencies.

Generally when you opt for a loan against gold, there is no pre-payment or part repayment charge. This means if you have the funds, you can close out the gold loan