How can a gold loan be availed from a bank or NBFC?

Government and Private Banks and Non-Banking Financial Companies( NBFCs) have been providing monetary solutions and many other services for over half a century. Loans are one among them that has been benefiting more and more people day by day in the past fifty-plus years. These loans provided by the banks and NBFCs are broadly categorized as secured and unsecured loans. A secured loan requires an asset as collateral, and an unsecured loan doesn’t. A gold loan is a secured loan as a liquid asset, i.e. physical gold is needed to be pledged as collateral to the bank or financial institute to avail this loan. Upon evaluating the gold, a value is determined based on the financier’s LTV ( loan to value) ratio, and the loan amount is granted for a specified number of months or years. After that, the principal amount with interest must be paid to close the loan account and have the collateral back.

It is the 21st century with technological innovations present as much as half the population of the world. Just like shopping and billing, a loan can also be availed online in addition to the offline mode. All required in an online mode is filling the application form, uploading the required documents, mentioning the loan details. If all the above three are done, a bank or NBFC contacts the applicant for further information, and the approval of loan and disbursal of principal is done soon after that. The conventional in-person mode is as easy and convenient as the digital mode. The applicant has to visit the bank or financial institute personally and submit the documents and pledge the gold, the loan is approved in several hours, and the loan amount is handed on the spot.

Features of a gold loan

The principal amount granted, as mentioned earlier, is based on the value of the gold. The value of the gold is determined based on certain factors like purity, weight, and rate of the gold on that day. The purity of the gold must be a minimum of 18 carats and a maximum of 24 carats. A purity that is not within the specified range is an unpermitted gold. The weight of the gold must be a minimum of 10gm in a few banks and NBFCs, but most other banks and financial institutes accept gold of any weight. The rate of gold varies from day today, and the gold rate on that day is considered. The gold loan’s loan to value ratio is a maximum of 90% up to Rs 1 crore in most banks and financial institutes. A gold loan’s loan term or tenure varies from 3 months to 3 years in most banks and NBFCs.The gold loan interest rate relies on the loan amount and tenure opted. The Muthoot Finance Gold Loan Interest Rate also starts from 7% like most others. The banks and financial institutes also offer flexible repayment options like bullet scheme payment and partial payment, including the regular EMI available in most loans. By opting for Bullet scheme payment, the borrower can pay the principal amount with the total interest of the tenure at the end of the loan term. By opting for partial payment, A borrower can pay the principal amount and interest as per their wish by opting for partial payment after discussing terms with the lender. In the regular EMI option, the borrower pays the interest in Equated Monthly Instalments(EMIs) till the end of the tenure and the principal at the loan term’s end. In most banks and NBFCs, the processing fee and pre-closure charges for processing and approving the application and shutting the loan before the end of the loan term are NIL. A gold loan’s processing is effortless and convenient, making it the most favorable and preferred loan in the finance market.

Also read this: Employment Factor In A Gold Loan Approval Process