Availing of a gold loan is a financing option wherein gold is pledged as collateral in order to raise funds. Furthermore, akin to personal loans, gold loans have no restrictions on their utility or purpose and can be used for any financial requirement that may have arisen.
While a loan against gold is an easy and quick way to meet your financial requirements, deciding where to avail it from and what key ideas to factor into your decision is not that straightforward.
Here, we put together various aspects of a gold loan that will help you make an informed decision.
1. Where to avail gold loans?
NBFCs, banks as well as registered companies, are authorised to lend against gold. However, while many NBFCs have a doorstep service wherein an agent carries out the procedure and facilitates the loan process at your home, banks require the individual applying for the loan to go to the bank branch with the gold he/she is willing to pledge.
2. How to go about finding a suitable lender and scheme?
Comparing lenders is of utmost importance. This includes comparing the background of the company and its promoters, interest rates offered by the lenders in the market and the LTV, tenure, and ticket size. When giving your coveted gold ornaments for safe keeping, it is pivotal to ensure that the gold ornaments are kept safe. Here is a brief of what these terms mean and their importance. This will further help you in deciding which plan would cater best to your interests and requirements.
3. What are the documents to be kept handy?
Documents required are as per RBI guidelines:
- Identity Proof- Driving license, voters’ ID card, PAN card, Aadhaar letter issued by UIDAI and Job Card issued by NREGA signed by a State Government official are accepted.
- Address Proof- Utility bill not older than two months, Aadhar Card, Passport, Telephone Bill, Rental Agreement, bank account statement, or property tax receipt is all accepted.
- Photograph of the individual applying for the loan.
4. What are the steps involved?
The steps involved in the gold loan process include:
- Choosing the right lender.
- Loan application procedure of personnel appraising your asset, i.e., the pledged gold.
- Further KYC and document verification process is carried out which is specific to individual institutions but carries a common trait to confirm identity and address.
- Loan disbursal upon choosing a suitable plan.
- Gold is transferred to a secure location either at the office of the lender or to NBFC/bank vault, where it stays until the loan is repaid, before being returned to the customer.
5. Additional details you need to look out for
- Conditions on foreclosure of the loan
- Changing interest rates on non-payment
- Loan restructuring terms
- Is the lender organization a professional outfit?
Lastly, once the gold loan is availed, the next step in the process is loan servicing. This period is when the customer is liable for the payment of regular EMIs or the principal payment along with interest at the end of the tenure in case of bullet payment.
The end of the payment cycle indicates the closure of the loan, and the customer can redeem the gold pledged on the successful completion of the loan.
