Dhanteras, a Hindu festival held annually in the days preceding the festival of lights known as Diwali, celebrates gold, considered one of the most fortunate metals in Indian tradition. Gold reserves in India are large enough to meet global demand. According to Statista’s estimates for 2019, the country’s gold reserve was roughly 600 metric tonnes. To put it simply, a gold loan is a loan used to purchase gold at lowest gold loan interest rate.
A loan secured by gold is referred to as a gold loan. To obtain a loan from an NBFC, individuals must first pledge their gold jewelry as collateral. Gold loan minimum tenure is typically made at a loan-to-value ratio that allows borrowers to obtain only a fraction of the metal’s full market value (LTV).
Confused About Who Owns the Indians?
It is nearly impossible to determine with any degree of accuracy how much gold Indian families actually own, but estimates place the amount at around 25.000 tonnes. This enormous quantity of gold is not contributing to the Indian economy since it is locked away in safes and lockers. The addition of even a fraction of these Rs. 110 lakh crore in assets to the national economy can have a substantial impact on GDP growth.
Criteria For Receiving A Gold Loan
Those who do not meet the requirements for conventional loans may find that gold loans are the best solution for them. One must be at least 18 years old to apply for and receive one of these loans. Also, you’ll need jewelry or ornaments made of gold that meets the required standard for purity. Thus, these loans do not necessitate a certain credit rating or fulfillment of other criteria.
Lenders’ concerns are reduced because of the gold’s role as collateral, and therefore more lenient requirements can be set. Financial institutions are fully within their rights to sell the pledged asset to recover any losses if borrowers fail to settle the dues within the agreed tenure.
Which forms of gold can be used as collateral?
Most loan providers will accept gold collateral, but borrowers must still meet minimum requirements. For instance, if we’re talking about jewelry, the item needs to be 18 carat or higher in purity. To add insult to injury, only gold jewelry made by reputable companies can be hypothecated. As a result, you might not be allowed to put up gold in the form of coins or bars.
Required Paperwork to Apply for a Gold Loan
The specific documentation procedure can vary between different lenders, but the following are some of the documents a borrower may be asked to provide:
- Aadhaar card, Permanent Account Number, Voter Identification Card, Driver’s License, Passport, and Other Identification Documents
- Aadhaar, voter ID, passport, driver’s license, utility bills, etc. can all be used as proof of residence.
- Looking for “gold loan providers near me” is a good way to find out if any further paperwork is needed to secure a loan.
Advantages of Gold Loans
Some of the recent success of gold loans is due to the following.
- Borrowers of gold loans can typically have their hands on the money just a few hours after the loan is approved, as opposed to waiting days or weeks for the funds to be deposited. As a result, this type of credit is useful for covering costs associated with unexpected events like medical bills, cash flow problems in a firm, and so on.
- The straightforward and hassle-free application process is an added bonus. The majority of loan applications may be completed online, saving borrowers substantial time.
- Whether a borrower is interested in a large or small gold loan, the availability of credit at the borrower’s front door can greatly improve their experience. A lender’s representative will visit the borrower’s house to measure and collect the gold and any supporting papers after the application has been submitted.
- Within a matter of minutes, the gold loan principal is paid electronically to the borrower’s account, and this agent then transports the collateral gold to a secure location. The borrower won’t have to take time out of their day to travel to the offices of the gold loan provider because of this procedure.
- Because of the underlying security, lending institutions face less risk. Lenders may afford to give such loans with low interest rates because the risk to them is low. These low prices guarantee ease of use and accessibility. Lowest gold loan interest rate means lesser monthly EMI payments, relieving some of the financial strain on borrowers.
- Credit applications from people who lack a sufficient credit history or score are frequently denied. In order to qualify for the majority of unsecured loans available, a credit score of 750 or higher is typically required. According to data compiled by TransUnion CIBIL, the vast majority (79 percent) of approved loan applications are made by applicants with excellent credit.
Similar to how there are no penalties for prepaying a portion of this loan, doing it entirely is also not going to cost you anything more, and you can get a gold loan minimum tenure. Those borrowers who are in a position to do so can reduce their interest costs by lowering the principal balance owed.