Unlocking the power of your gold assets is easier than ever! Discover the step-by-step guide for beginners on getting an instant gold loan and seize financial opportunities today. Here’s how?
A statement released by ICICI Bank suggests that a gold loan, also known as a loan against gold, is a secured credit facility provided by banks and financial institutions. It allows you to use your gold jewellery or ornaments as collateral in exchange for funds.
Gold loans, being secured loans, come with a lower interest rate compared to personal loans, which are unsecured. Moreover, gold loans entail lower processing fees and charges, whereas personal loans generally incur higher fees and charges. These loans offer a convenient and accessible option, leveraging the value of gold as collateral.
In this article, you will find a comprehensive step-by-step guide to help you understand the process of obtaining a gold loan.
Steps Involved in Getting A Gold Loan
Now, get a gold loan just by referring to the given steps:
1. Research and Select a Lender
The first step in getting a gold loan is to research and select a reliable lender. Look for established financial institutions (HDFC, SBI, ICICI), aggregators (for instance, Buddy Loan), or banks that offer gold loan services. Consider factors such as gold loan interest rates, loan-to-value ratio, repayment terms, and customer reviews.
Also, pay close attention to the lender’s reputation, credibility, and customer service for a seamless borrowing experience.
2. Understand the Gold Loan Eligibility Criteria
Once you have chosen a lender, familiarize yourself with their gold loan eligibility criteria. Typically,
- Lenders require borrowers to be within the age range of 21 to 70.
- The gold being pledged should meet certain quality standards, i.e., it should be at least 18 – 22 karats pure.
- The borrower must be in possession of the gold in order to get eligible for a gold loan.
- Gold loan with a poor credit score is not a big deal, as it is a secured loan. Hence, lenders do not bother worrying about the ups and downs of a credit score.
3. Appraise the Gold
The next step involves getting your gold appraised by the lender. Visit the lender’s branch office or designated appraisal center to have your gold jewelry, coins, or bars evaluated. Professionals assess the purity and weight of the gold, by determining its market value.
The loan amount sanctioned will depend on the loan-to-value ratio set by the lender, typically ranging from 60% to 75% of the gold’s value.
In the next step toward applying for gold loan, you will learn about all the documents required in the gold loan process.
4. Complete Documentation
Complete documentation is essential for a gold loan as it provides the lender with proof of the borrower’s ownership of the gold. After the appraisal process, you will need to provide the necessary gold loan documents to initiate the loan application. Commonly required documents include:
- Identity (Aadhar card, driver’s license, etc.),
- Address (utility bills, bank statements, etc.),
- Ownership of the gold being pledged (purchase receipts, invoices, etc.).
Fill out the loan application form accurately and attach the required documents to proceed with the verification process.
5. Verification and Approval
Once you have submitted the loan application and supporting documents, the lender will initiate the verification process. This includes validating the provided information, conducting background checks, and verifying the ownership of the gold. Upon successful completion of the verification, the lender will approve the loan and communicate the terms and conditions, including the loan amount, interest rate, and repayment schedule.
6. Loan Disbursement
After gold loan approval, the lender will disburse the sanctioned loan amount to your designated bank account or provide you with a cheque or cash equivalent. Some lenders also offer the option of receiving the loan amount through prepaid cards. Ensure that you understand the disbursement process and clarify any queries regarding repayment schedules, interest rates, and repayment methods at this stage.
Obtaining a gold loan involves a systematic process that begins with research and lender selection, followed by the assessment of your gold assets and document verification. The loan application and agreement stage solidifies the terms and conditions, while the evaluation determines the loan amount. Once approved, the disbursed funds can be utilized as needed. Timely repayment is crucial to avoid penalties and protect your gold assets. By understanding and following this step-by-step guide, you can navigate the process smoothly, leveraging your gold assets to fulfill your financial needs conveniently and securely.
Q: What is a gold loan?
A: A gold loan is a type of secured loan where borrowers pledge their gold jewelry or coins as collateral to obtain funds from a lender, typically based on the value of the gold.
Q: How does a gold loan work?
A: In a gold loan, borrowers provide their gold as collateral to lenders in exchange for funds. The loan amount is determined based on the value of the gold, and timely repayment ensures the return of the collateral.
Q: What is the loan-to-value (LTV) ratio for a gold loan?
A: The loan-to-value (LTV) ratio for a gold loan typically ranges from 60% to 75%, meaning borrowers can receive a loan amount equivalent to 60% to 75% of the appraised value of their gold assets.
Q: How is the value of my gold jewelry determined?
A: The value of your gold jewelry is determined by assessing factors such as its purity, weight, and prevailing market rates, typically done by a lender or appraiser.
Q: Can I pledge gold coins or bars for a gold loan?
A: Yes, gold coins or bars can be pledged as collateral for a gold loan, providing a valuable asset to secure the loan.
Q: What is the maximum loan amount I can get against my gold?
A: According to RBI guidelines, banks can lend up to 90% of the gold’s value, with a minimum 10% reduction. The loan-to-value ratio typically ranges from 55% to 65%, ensuring a 35% to 45% safety margin for banks.
Q: How long does it take for a gold loan to be approved?
A: You have the flexibility to choose a loan repayment duration between 6 and 24 months as the borrower.
Q: What is the interest rate charged for a gold loan?
A: Gold loan interest rates range from 8% to 18% per annum in the public sector, while in the private sector, rates can go as high as 24% per annum.
Q: Can I apply for a gold loan online or do I need to visit a branch?
A: While it is possible to apply for a gold loan online, you will still be required to visit a bank branch or NBFC office to physically deposit the gold and undergo purity checks