According to data released by the RBI, the gold loan segment in India has increased by 66% to Rs. 62,926 crores in August 2021. This boom is significant for a single lending instrument, and some of the borrower-friendly features of this financial product are responsible for this.
Starting from affordable gold loan interest rate to its easy repayment options, this financial product makes borrowing hassle-free. Nonetheless, here are answers to the 11 questions about gold loans that are commonly asked to help prospective applicants to make an informed decision.
Answers to 11 Questions About Gold Loans That Everyone Should
Before applying for a gold loan, know these below-mentioned questions and answers –
- Who can apply for a gold loan?
Any adult Indian citizen is eligible to apply for a gold loan, irrespective of their profession. Individuals in the age bracket of 21 to 70 years can apply for this credit if they possess gold items. However, since these parameters are lender-specific, do refer to a financier’s requirements before applying.
- Is a high credit score mandatory for availing credit against gold?
No, a high credit score is not mandatory to secure a gold loan. However, doing so enables a borrower to enjoy a better gold loan interest rate and repayment terms.
- What are the documents needed to avail of a loan against gold?
One only needs to submit their identity proof and address proof to avail of a gold loan. Since this requirement will change as per the choice of lender, one should refer to the specific documentation requirements by a financier to learn more about it.
Keeping them handy can fasten the loan application process further.
- How long does it take to avail of a gold loan?
Typically, it takes a few hours to secure a gold loan. Once applied, company executives will contact applicants for gold appraisal and document verification, and once it is completed, one can get the loan amount in no time.
However, note that this process can get delayed if there is any gold appraisal or documentation discrepancy.
- What is the gold appraisal process?
Gold appraisal or gold valuation is a process that determines the loan amount an applicant is eligible for. Once borrowers apply for credit, a team from the specific lender will visit their house with industry-grade gold evaluation equipment to check the purity and weight of the gold items. Afterward, they will determine the loan amount based on this.
- What are the types of gold items I can use for a gold loan?
Typically, one uses gold jewellery primarily to secure a gold loan, but coins and bars are also accepted in some cases. Nonetheless, one should refer to the choice of lender to learn more about this. All leading gold loan providers accept items of 18 carats to 24 carats for this purpose.
- What is the maximum loan amount I can get against my gold articles?
As per RBI’s guidelines, you can get up to 75% of the market value of your total gold items. So, if one has gold articles of Rs. 2 lakh, you can get up to Rs. 1,50,000 as a loan. This percentage is uniform across all lenders, but the maximum loan amount is financier-specific.
- What is the maximum repayment period available for gold loans?
The maximum repayment period for a gold loan is usually 3 to 12 months. Moreover, the borrowers have the liberty to choose a tenor of their choice as per their repayment capacity.
Opting for a longer tenor will reduce EMIs, but it may impose a higher gold loan interest rate. Hence the total interest outgo will increase as well. Thus, prospective borrowers can take the assistance of an online calculator to find a tenor of their choice.
- What are the repayment options available to pay off a credit against gold?
Similar to any other credit instrument, one can repay this financial product via regular EMIs as well. Apart from that, financiers like Bajaj Finserv allow their customers more flexibility in this regard by offering two other methods.
Here, one can pay the interest periodically and the loan principal at the tenor’s end. Otherwise, they can pay the total interest upfront and loan principal at the tenor’s end.
Additionally, part payment and foreclosure facilities are available as well.
- What is a part-release facility?
Under the part release facility, borrowers get the option of making a substantial repayment, and in turn, lenders release gold articles of the equivalent amount.
- What is a gold loan calculator?
A gold loan calculator is an online device that aids individuals in estimating the maximum loan amount they are eligible for against specific gold items. It also let them know the total interest payable against a particular tenor.
Besides understanding the fundamentals of this financial product, individuals should also learn about the gold loan interest rate in detail to get a better idea about their debt.