A leading news article house recently reported that households across the country stack gold items of around $1.5 trillion according to the current value of this yellow metal. Owing to the equity of gold and other associated factors, the demand for funds against this yellow metal has witnessed a rise in the present times, especially after the economic downturn due to the pandemic.
Therefore, to maximize this credit option's benefits, individuals need to have a clear idea about the gold loan process and how they function in the country.
What is a Gold Loan?
A gold loan is a secured credit option, where individuals pledge their gold jewellery items to obtain substantial funds against it. It constitutes another type of secured credit facility where borrowers pledge their high-value asset as collateral and reclaim it once the repayment is made. Additionally, borrowers can enjoy attractive gold loan interest rates against such funds.
Unlike other secured loans, gold loans do not end-use restrictions. The interest rates on a gold loan can vary depending on the lender and their specified eligibility parameters. With facilities like attractive gold loan rate per gram, minimal documentation, flexible tenor and hassle-free disbursal, this credit option is borrower-friendly and more affordable than other types of financing options.
The entire gold loan process is similar to that of other secured loans. However, in this type, you submit gold items to the lender and other documents, and the lender carefully evaluates the gold article and verifies the documents. Then, based on this evaluation, the lender sanctions the loan amount.
How Does a Gold Loan Work?
A loan against gold is a unique credit option because of its working principle. Here’s a synopsis of it:
Online application
The procedure of this credit option begins with an online gold loan application, just like any other financial product. Here, individuals have the option to apply for a gold loan online by filling out an application form with all necessary details and required loan amount, or they can visit the nearest branch of their respective gold loan provider to avail themselves of offline services.
Gold articles evaluation
This is where the gold loan process is different from that of other financial products. After applying for credit, the first thing that any lender would do is evaluate the gold ornaments. Ideally, leading financiers like Bajaj Finserv only accept 18-22 carats or higher. Depending on this evaluation, where purity and weight are checked, a financial institution determines the exact loan amount that an individual is eligible for.
Here, borrowers must note that RBI has capped the LTV ratio of a gold loan at 75%. Lenders extend the loan amount to the applicant based on the evaluation and market price of pledged gold. In this regard, individuals can use a gold loan calculator beforehand to assess repayment liability. This online tool displays accurate results within seconds and allows borrowers to manage their finances efficiently.
Eligibility and documentation
The next step on how this credit facility works is the eligibility and documentation. Being a secured credit option, gold loans do not impose strict eligibility and documentation. However, the applicant’s age should be within 21-70 years and need to submit a gold loan document, address proof, and income details.
Credit approval
After evaluating gold articles, documentation and signing of a loan agreement, the credit disbursal process begins. Finally, borrowers will receive their desired loan amount into their registered account. The entire gold loan process from application to disbursal takes a few hours to complete and ensures a hassle-free loaning procedure.
What is The Type of Gold Accepted?
Irrespective of a borrower’s employment status, one can qualify for this credit if they possess substantial gold assets to obtain funds against it. However, one must note that this credit facility is available only against pure and fine gold jewellery. Therefore, gold bars and coins will not be accepted as collateral for disbursing the loan amount.
Availing gold loan from leading financiers like Bajaj Finserv helps individuals avail flexible repayment options. In this case, individuals can pay the interest either monthly or quarterly and repay the principal at the end of the tenor. Alternatively, one can pay their total interest amount at the beginning of tenor and repay the principal sum later. Borrowers can choose yet another way to repay the credit, that is, in a traditional EMI structure involving both principal and interest components.
Thus the demand for this particular credit has significantly increased due to a hassle-free gold loan process and exclusive features. This trend will continue as gold prices are higher, allowing borrowers to avail themselves of a sizeable amount to meet varied requirements.
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