Things to Keep in Mind Before Opting for Gold Loan

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The gold loan has a lower interest rate than a personal loan. You can Gold loan instantly compared to personal loans.

Many times we need money in an emergency. In such a situation, Gold in the house can be quite useful. Companies like Manapuram Finance, Muthoot Finance, IIFL offer gold loans.

Some government and private sector banks also offer gold loans. You can take cash by pledging gold ornaments, coins, etc. After paying all your repayment of your loan, the pledged jewelry or gold is returned to the customer.

Interest has to be paid on the loan amount. The gold loan has a lower interest rate than a personal loan.

How much interest do you think?

Finance companies and bank interest rates for gold loans are different. These range from 10 percent to 15 percent. For example, ICICI Bank charges interest from 10% to 16.50% per annum on gold loans. Along with this, a one percent processing fee is also charged.

SBI collects half of the loan amount as a processing fee with 11.05 percent annual interest on gold loan. The interest rate of the Manpuram gold loan starts at 14 percent. Therefore, before taking a loan, you should know about the interest properly.

The loan is only 75% of the total value of gold.

The bank or non-banking finance company in which you apply for a gold loan first check the quality of your gold. In view of the possibility of gold being fake, finance companies and banks have made very strict standards to check the quality of gold. The loan amount is decided according to the quality of the gold. Banks usually give loans up to 75 percent of the value of gold.

Keep these things in mind

  • Like any other loan, discipline is necessary for gold loan re-payment. If you do not pay on the due date, the lending bank may impose a penalty of 2-3 percent.
  • If you do not pay EMI for more than three gold loans, then the penalty amount increases.
  • The document that the finance company signs with you while giving a loan, states that the condition is that if you do not repay the EMI of the loan for 90 days, then the bank pledged your gold to recover your outstanding amount after the grace period.
  • Many financial institutions can sell and charge processing fees while giving loans. The penalty is charged on pre-payment.
  • Processing fees can be up to a maximum of 0.5-2 percent of the loan amount.
  • Many banks also charge money in the name of valuation charge, ie, they charge fees in the name of expenses incurred in checking the quality of gold.

Also, know this before applying for a loan.

What are the benefits of a gold loan?

  • Gold loan interest rates can be lower than personal loans.
  • You borrow money by pledging gold, so the loan gets approved in a very short time, for a home loan or other loan, your CIBIL i.e. credit score is necessary.
  • However, credit history is not required in gold loans.
  • No certificate or guarantee is required to take a gold loan.
  • Gold loans do not attract the pre-payment penalty on repayment ahead of time like other loans like home loans or personal loans.

These are necessary documents

  • A copy of ID card is necessary. In these, PAN / Passport / Aadhaar / Driving License or any other identity card can be given.
  • For address proof, you have any one of Aadhaar card/electricity bill/telephone bill/water bill/ration card. Many banks ask for a passport or driving license to check your signature. Along with this, a passport size photo is also necessary.

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