A gold loan is a form of a secured loan. A secured loan is when an individual provides an asset as security in exchange for the loan amount. In the case of a gold loan, the individual provides gold coins or gold jewellery as security in exchange for the loan amount.
Since gold loans are secured loans, the interest rates on a gold loan are comparatively lower than an unsecured loan. This is a very big advantage one has when applying for a gold loan. The interest rates begin at just 9.95% and can vary a little based on certain factors such as credit profile and income.
If an individual does not have a good credit score or is new to credit and therefore, does not have a credit score, he/she can still avail a gold loan. This is because it is a secured loan. A credit score is a three-digit number that shows the customer’s creditworthiness to the lender. Since a gold loan is a secured loan, the lender can always sell the gold to compensate for the loan amount if the customer fails to repay the lender. This is why a credit score is not very important in the case of a gold loan.
Gold loans are generally considered to be short-term loans as their tenures are not very long. The tenures range from 3 months to 4 years in some cases.
The process to get a gold loan
1. Visit your nearest lender’s branch with the gold coins jewellery that you wish to pledge for the loan amount.
2. The gold coins or jewellery that you provide as security will then be assessed and evaluated by the lender.
3. Around 60% to 70% of the gold’s market value will then be released as the loan amount.
4. The gold is then locked away safely and securely in a vault or a locker.
5. The gold is then returned to the individual when the loan is repaid fully.
1. ID proof
2. Address proof
ID and Address proof can be shown through the following documents:
2. Diving License
3. Voter's ID Card
4. Aadhaar Card
5. PAN (Permanent Account Number) Card or
6. Form 60
This can vary from lender to lender, so it is best to check with your lender as to what documents are needed for the same.
To apply for a gold loan, click here.