What is a Gold Loan ?

It is a loan that is taken against the gold. You'll have to pledge your gold at any bank or NBFC that provides a gold loan facility to get funds in this loan. Borrowers have to repay the amount borrowed within a loan tenure. Bank's also charge interest that has to be paid along with the loan amount. The interest rate differs amongst creditors from one bank to another. It has a lot of benefits and features that can help customers in the long run.

It is essential to repay the loan amount on time. Missing even a single installment will affect your credit score negatively. If the borrower is unable to repay the loan, the bank will confiscate your gold and auction it off to collect the loan amount. However, banks (like Karur Vysya Bank Gold Loan, Axis Bank, ICICI Bank) will give multiple notices before making any decision.

Banks don't place restrictions on the way end-use of funds given through gold loans. So customers are free to use funds however they want. But they can't use those funds for illegal activity. So whether it's for your wedding, vacation, down payment, debt consolidation, or medical expenses, taking a gold loan is the optimal way to meet your current fund requirement.

Advantages of Gold Loan :-

1. Flexibility :-
Customers have the flexibility to use funds they get from gold loans for various purposes. Banks don't monitor the end use of the funds.

2. Documentation :-
Customers don't have to worry much about the documentation process. Banks will only ask for documents like Aadhar Card, Pan Card, Passport, or Driving Licence for Identity proof. And Utility Bills for Address proof.

3. Credit Score :-
A customer's credit score doesn't matter. So anyone who has a bad credit score can apply for a gold loan. And you can even use this loan as an opportunity to increase your credit score.

4. Repayment :- Banks give customers the flexibility to choose a repayment structure and tenure according to their budget and income. So you have the flexibility to calculate your expenses using some tools like a Gold Loan Calculator and then choose a suitable repayment structure for you.

Procedure for Gold Loan :-

The entire process of a gold loan is very easy and quick. The entire process is completed within 1-2 hours.

We've listed the entire process below :-

1. You'll have to fill out the application form. After that, you can use both online and offline methods. Complete all the necessary details required.

2. Then you'll have to attach some necessary documents regarding your identity proof (Aadhar Card, Pan Card, Passport or Voter ID Card) and Address proof (Electricity Bill, Telephone Bills or other Utility Bill).

3. After you're done with the documentation process, the bank will move ahead with the valuation process. Here they will measure your gold ornament's purity and weight. Then, to decide the gold loan amount.

4. Once you've agreed to all the conditions stated by the bank, then the bank will move ahead with the disbursal process. The amount will be disbursed in your bank account within one or two hours.

Gold Loan eligibility :-

Age :- The minimum age should be 18 years.

Profession :- Farmers, Traders, Salaried, Self-employed, Unemployment, Housewife, etc.

Gold accepted :- Gold ornament, coins, pieces, etc.

Gold Purity :- The minimum gold purity required is 18 karat.

Identity proof :- To prove your identity you'll have to submit documents like Aadhar Card, Pan Card, Passport, or Voter ID Card.

Residence proof :- For this, you'll have to submit documents like Electricity Bill, Telephone Bills, Water Bill, or other Utility Bill.

Loan Amount :- The minimum loan amount given by banks is INR 2,000 in rural areas. And INR 10,000 in urban areas.

Conclusion :-
You'll have to decide the interest rate and choose a repayment tenure and structure during this process. In conclusion, it is preferable if you investigate all of the aspects before deciding on your desired structure and tenure.

Also read this: Factors That Influence The Gold Loan