Most people show interest to avail a gold loan for better future and investment but there are lots of things which are essential to know for getting a gold loan in India.
After all these years Indians have finally ‘struck’ gold. Suddenly Indians are using their family gold to gain personal loans, something that was considered a taboo. Ads for gold loans are increasingly picturing women advising their husbands to use their gold for the greater good of the family. Guess times are changing and we are changing with it.
How To Get A Gold Loan
The loan against gold was around Rs 1.2 lakh crore by August last year! We are certainly getting the idea that gold is not just something to make us look good.
However, there are some things you need to know before running head over heals to the nearest bank, to take a gold loan in india.
The first thing that comes to our mind when going for a loan is the interest rate charged. Does a Gold loan provide a better interest rate than personal loans? And if they do, from where should we take it; banks or NBFCs?
The answer is that gold loans charge less interest rate than personal loans and it is better to take it from a bank because NBFCs charge higher rates. While banks charge around 12% to 15% for gold loans, NBFCs charges are usually high. It may vary from 12% to 22%. Some times it may rise to about 33%.
If the purity of gold is high then interest rates are lowered. Besides, if you pledge a high amount of gold with respect to the loan taken, then they will charge you less interest.
Credibility of Banks
If you are dealing with NBFCs and other smaller players in a gold loan, you should be very cautious. You must check if these institutes are genuine or not. Make a background study about the NBFC and see if these institutes have come under any allegations or investigations.
Do not believe what they say in their ads. They could say they are the best in the world even if it has only one office and that too located in your vicinity. Check if they have a considerable asset back up and track their performance over the years.
Loan Amount is Lower than Gold Amount
One major defect of gold loans is that we do not get the full amount for the gold we have pledged. Most NBFCs and banks provide 70% to 85% of the gold amount as loan. However if the loan amount is 50% or less then we can negotiate on the interest rates charged. It will be favourable to us.
Repayment and Default
Loan tenures differ among different banks and NBFCs. Sometimes it is for 12 months and at other times it is for one month. Individual banks like SBI stipulate that a small amount of principal must be paid along with interest. NBFCs usually expect interest to be paid every month and in the end the principal is paid to retrieve the gold.
If you have ever defaulted on a bank or NBFC, don’t go there to pledge your gold. They could appropriate that gold for the earlier payment you are supposed to make.
How Gold Prices are Calculated
There are many ways in which banks and NBFCs calculate the price of gold you pledge. Some NBFCs and banks have a fixed price and revise it every 6 or 12 months. Others take the last two weeks’ worth and average it to get at the cost of gold. Many other companies just take the international rate on that particular day. These companies provide loan on how they calculate the price of gold. So it is essential that you learn which is profitable for you.
Gold loans are more suitable in most ways, especially when you need a small amount of money. Gold loans have no or minimal processing fees and it doesn’t take more than one day to get your loan. The lender usually does not check if the borrower is creditworthy and the procedures are also straightforward.
For getting a gold loan you should contact your family advisor and after doing detailed research you should talk with your loan provider or from the bank and ask them how much interest will they charge for a loan and how can they pay the loan.
There are some specific requirements that you need to fulfil such as your credit score, documents, salary slips, house address etc.
I have mentioned all things that are important for availing a gold loan in India and some requirements which are essential for verification process in India, so if you are going to get a gold loan you should always concern with your financial advisor and before applying for a gold loan always do research on interest rates and profits that you will get.
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