What is a gold loan?

Asked by: Nicolas Reilly  |  Last update: February 9, 2022
Score: 4.7/5 (55 votes)

Gold loan (also called loan against gold) is a secured loan taken by the borrower from a lender by pledging their gold articles (within a range of 18-24 carats) as collateral. ... Secured Loan Type: You are not required to submit any other security/collateral to the lender other than the pledged gold ornaments.

How does a gold loan work?

For a Gold Loan, the bank takes your gold as collateral for the period of the loan. Banks charge an interest rate, and once you repay the entire loan, the bank returns your jewellery. Another essential thing you need to know about how Gold Loan works is the type of gold accepted. Most banks accept only gold jewellery.

What is gold loan in bank?

You can pledge your gold ornaments and jewellery for funds in the event of a financial emergency. ...

What is gold loan example?

Loan to value ratio or LTV ration means the amount a customer will get against the value of gold. For example, if the value of jewelry is INR 10,000 and the LTV is 65%, the maximum loan amount the customer can get would be INR 6,500.

What are the benefits of gold loan?

Know 5 benefits of a Gold Loan
  • Instant Loan Across the Table: You get access to funds, instantly. ...
  • Attractive Interest Rates: Gold Loan interest rate varies from one bank to another. ...
  • Simple & Easy Documentation: The documentation process to avail a Gold Loan is not as stringent as a Personal Loan.

What Is A Gold Loan? Everything You Need To Know About Gold Loan

33 related questions found

Is taking gold loan Safe?

Not checking creditor's credibility: A gold loan is a secured loan, which implies that it is protected by collateral (gold in this case). This collateral remains with the creditor or lender till the loan amount is completely paid off. ... This is a good way to provide security to a creditor but what about the borrower.

Why is gold loan important for banks?

A Gold Loan can enable you to tide over unexpected financial setbacks, but it is vital to approach a lender that is governed by the RBI, such as HDFC Bank. Apply for Gold Loan today and fulfil your financial needs on your own like business needs, unexpected expenses, or bill payments.

How do banks earn from gold loans?

The PSU banks normally refinance the gold loan companies at 11-13% as it is fully secured. However, the gold loan companies, in turn, charge anywhere from 18% to 32% annualized based on the credit risk perception of the borrower. It is this huge margin that keeps the gold loan companies going.

Is gold loan easy to liquidate?

“The time required to process a gold loan is very small compared to other secured loans. The processing fees are low and often lenders may not take the income or credit score of the borrower into account while approving the loan,” points out Adhil Shetty, CEO, BankBazaar.

What is the minimum gold required for gold loan?

Gold loan providers give advances on gold ornaments having 22 karat purity or more. Further, gold bars or gold coins over 50 gms are not acknowledged as insurance by NBFCs and other financial institutions.

How do I repay my gold loan?

Yes, you heard it right! No need to pay principal and interest during the loan tenure! Just pay the entire amount after your loan is finished. You need not service EMIs in this type of gold loan; just pay the entire due amount at the end of the term in a single shot, hence the term bullet repayment.

What is gold loan interest rate?

The interest rates on gold loan, availed by pledging gold, are relatively lower than other types of loans and range between 7.35% to 29% p.a. Banks and other financial institutions in India offer gold loans, the loan amount for which ranges from Rs. 1500 to Rs. 1.5 crore.

What happens if gold loan is not paid?

Gold is Auctioned

Since the gold has been pledged as collateral against the loan, failure to repay (three consecutive payments or more) will ultimately lead to the gold being auctioned off by the bank or the financial institution. This is now a non-performing asset and will be sold off for recovery.

Which type of loan is best?

1. Personal loan. A personal loan is one of the most popular types of unsecured loans that offer instant liquidity. However, since a personal loan is an unsecured mode of finance, the interest rates are higher than secured loans.

Will banks loan against gold?

You offer the lender your gold. The lender gives you a loan against your ornaments after a quick evaluation of its purity. The lender will usually not give you the loan up to the full value of the loan, but generally you can get up to 80% of the value.

Is it better to sell gold or take gold loan?

In the quarter ended March 2021, Manappuram Finance auctioned gold worth Rs 404 crore, compared to a total of Rs 8 crore during the first three quarters. However, if the loan is for funding short-term working capital needs and to cover up for a stretched payment cycle, it is advisable to take it.

Is gold loan better than home loan?

Interest rate - All loans carry an interest rate. A home loan top up interest rate is cheaper than a gold or personal loan. This is because a top up loan interest rate is only 0.5% to 1% higher than home loan interest rates. ... A gold loan's interest rate comes anywhere between 10% to as much as 26% in some cases.

What is difference between personal loan and gold loan?

The loan tenure is the period the lender gives to the borrower to pay off the loan. Personal loans tend to have terms ranging from one to five years, while gold loans give much shorter repayment periods ranging from three years to as little as seven days, depending on the loan amount.

Who are the gold loan customers?

Who is eligible to get a gold loan? Ans: You can apply for a gold loan if you are a trader, businessman, salaried employee or self-employed or a farmer. The age criteria vary from one bank to another, however, you can get a loan against loan if you are between 18 and 60 years of age.

Can we pay gold loan monthly?

A regular EMI-based repayment of gold loan plan is geared towards salaried persons who have a fixed monthly income. The EMI amount due includes repayment on both the interest and the principal amount. Since the loan is favourable for salaried persons, it is approved sooner.

Which day is best for gold loan?

The planet Mercury is ruled on this day. Mercury is the representative planet of intellect and business, as well as it is considered an auspicious planet. For this reason, Wednesday is considered the best day to take or give a loan.

Which bank gives loan against gold?

BOP Sonay pe Sohaga is a running / cash / demand finance facility against pledged gold bullion / gold ornaments for consumers to meet cash requirements.

What is the maximum tenure for gold loan?

Typically Gold Loan maximum tenure for repayment is 24 months in case of long-term loans repaid in EMIs, and six months in case of short-term loans repaid in a lump sum. If you opt for monthly instalments, you can repay the loan in a maximum of 24 payments.