A gold loan has become a trendy way for people to raise funds for their requirements, especially in smaller towns and cities. A gold loan is a type of personal loan where the gold acts as collateral for the loan. This loan is given out for a short duration. However, unlike personal loans, gold loans can be structured so that the interest is paid during the tenure and principal is repaid at the end of the mandate.
Features of a gold loan:
• The amount of the loan depends on the value of the gold. Each lender generally has in house verification facilities to arrive at the value of the gold. The cost depends on the market prices for gold. Lenders verify the weight and the purity of the gold typically.
• Generally, most lenders have a loan to value ratio (LTV) of around 65% to 75% for a loan against gold. This means 65% to 75% of the value of the gold will be given out as a loan. Some lenders may offer a higher LTV but charge a higher rate of interest.
• The gold has to be hypothecated, which means it will be kept under lock and key by the lender.
• The lender usually appraises the gold in front of the customer. It is essential to ensure this process happens in front of the customer to provide complete transparency.
• Like a personal loan, a loan against gold does not have any conditions on the end use of funds. Also, a gold loan can be prepaid before the due date without incurring any charges for the same.
• It is important to check the repayment schedule and the charges before taking the gold loan. Each gold loan lender has a different repayment schedule, which is why it is best to check the type of repayment, i.e. principal at the end of the tenure with regular interest payments or regular interest and principal payments.
• A gold loan is a secured loan. This means in case of default; the lender can dispose of the gold to recover the unpaid interest and principal amount. However, this disposal will happen only after giving sufficient notice to the defaulting borrower.
• The gold loan interest rate varies from lender to lender, but an indicative range for gold loans is between 9.5% to 18.5% depending on the lender. Lenders may charge a higher rate of interest for borrowers who want a higher LTV.
• To take a gold loan, lenders only require basic KYC documents such as identity proof and address proof for availing the gold loan.
A gold loan is an excellent way to raise funds quickly, especially in case of emergencies. Lenders disburse loans rapidly which makes it especially well suited when funds are required in a hurry.
Features of a gold loan:
• The amount of the loan depends on the value of the gold. Each lender generally has in house verification facilities to arrive at the value of the gold. The cost depends on the market prices for gold. Lenders verify the weight and the purity of the gold typically.
• Generally, most lenders have a loan to value ratio (LTV) of around 65% to 75% for a loan against gold. This means 65% to 75% of the value of the gold will be given out as a loan. Some lenders may offer a higher LTV but charge a higher rate of interest.
• The gold has to be hypothecated, which means it will be kept under lock and key by the lender.
• The lender usually appraises the gold in front of the customer. It is essential to ensure this process happens in front of the customer to provide complete transparency.
• Like a personal loan, a loan against gold does not have any conditions on the end use of funds. Also, a gold loan can be prepaid before the due date without incurring any charges for the same.
• It is important to check the repayment schedule and the charges before taking the gold loan. Each gold loan lender has a different repayment schedule, which is why it is best to check the type of repayment, i.e. principal at the end of the tenure with regular interest payments or regular interest and principal payments.
• A gold loan is a secured loan. This means in case of default; the lender can dispose of the gold to recover the unpaid interest and principal amount. However, this disposal will happen only after giving sufficient notice to the defaulting borrower.
• The gold loan interest rate varies from lender to lender, but an indicative range for gold loans is between 9.5% to 18.5% depending on the lender. Lenders may charge a higher rate of interest for borrowers who want a higher LTV.
• To take a gold loan, lenders only require basic KYC documents such as identity proof and address proof for availing the gold loan.
A gold loan is an excellent way to raise funds quickly, especially in case of emergencies. Lenders disburse loans rapidly which makes it especially well suited when funds are required in a hurry.
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