It is a type of secured loan also called as loan against gold taken by the customers i.e borrower from the lender i.e Bank or NBFC by pledging their gold jewellery as collateral. The loan amount is decided by the current market value & quality of gold which is generally upto 80 % of the value of the gold. Gold loan is preferred over personal loan & business loan as it has less interest rates & minimum documentation required.
① Fast Disbursement : Gold loan is the fastest loan amongst all types of loan for getting sanction & disbursement. Some Banks offer spot sanction over the counter & loan amount disbursed in customers accounts on the same day.
② Minimum Documentation : To avail gold loan, minimum documents are required. You just need to fill an application form & submit KYC documents & your loan will get approved.
③ Quick Approval : Since minimum documents are required for a gold loan, it gets quick approval. Therefore it is the most preferred loan in case of emergency for the customers.
④ Lower Interest Rates : Gold Loan is the most popular loan amongst all types of loan due to its lower interest rates as compared to personal loan & business loan. You can save money on interests by applying for a gold loan rather than applying personal loan.
⑤ Repayment Flexibility : Many Banks & NBFCs offer flexible repayment options & tenure which varies from a few days to maximum 3 years.
⑥ No Income Proof : There are Banks & NBFCs which offer gold loans without income or financial documents upto certain limit of loan amount. You can get a loan with only KYC documents upto certain limits.
The interest rates are nothing but fees charged on the loan amount taken for a specific loan tenure. Interest rates on Gold loans depend upon various factors as mentioned below.
① Type of Gold Loan : The interest rate on gold loan depends upon type of gold loan like Banks charge lower interest rates on agricultural gold loan given to farmers & higher interest rates to term loan & overdraft type of gold loan given to businesses.
② Loan Amount : The interest rates are lower for higher loan amount & higher for smaller loan amount.
③ Existing Bank Account Holders : Many Banks offer lower interest rates on gold loans to their existing customers i.e individuals having their account in that bank.
④ Loan to Value Ratios : Usually banks charge higher interest rates on gold loans with a high LTV ratio.
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① Compare Processing Fees : Every bank charges a certain percentage on the total loan amount as processing fees also known as administrative charges. It can be fixed i.e flat amount or a certain percentage of the loan amount. Therefore one must check processing fees lender charges on gold loan & compare it with different banks before taking the gold loan.
② Prepayment & Foreclosure Charges : When you pay the entire loan amount before tenure it's called foreclosure & when you pay some part of loan it's called part prepayment. It is very important to check & compare these charges levied by Banks & NBFCs on Gold Loan before taking it.
③ Compare Interest Rates : It is also one of the most important factors needed to Compare with different banks offering Gold Loan before coming to the conclusion of taking a gold loan with a particular bank. Lower the interest rate, lower will be monthly EMI outgo to the customers & ultimately low interest on total loan amount.
④ Miscellaneous Charges : One must compare other miscellaneous charges like EMI bouncing charges, legal fees, late EMI payment penalties etc of different Banks & NBFCs providing Gold Loan.
