A gold loan can be availed against the physical pledge of gold as collateral with a lender. The lender will, in turn, grant you a loan amount based on the market value of your gold. And after you fully repay the loan amount along with interest at the end of your decided tenure, your gold is returned.
Loan against gold can either be in the form of gold bars, gold coins, or gold jewellery. There is a complete evaluation done by the financial institution before sanctioning the gold loan.
Gold loans are one of the fastest and easiest ways to monetize your gold and get money for an individual who owns gold either in the form of jewellery or as gold coins or bars.
Here’s a detailed list of some essential things to know about gold loans:
Gold Loan Tenure
Gold Loans have a short tenure arranging between 12 months to 24 months. So, before availing a gold loan, you need to make sure that you will repay the loan within the chosen loan tenure.
Background Check on Lender
You can avail Muthoot gold loan from top lenders in the country such as Muthoot Fincorp Ltd. Lenders are a trustworthy source, but it’s essential to do thorough research before settling for a lender. Several jewellers in the market offer even lower interest rates than lenders, but, you need to completely trust the jeweller before taking a loan from them as the chances of frauds with lesser-known jewellers are the highest.
Rate of Interest
The gold loan interest rates are high as compared to other modes of finance. But interest rates vary from one lender to another. Gold loan interest rate ranges between 9% to 20% depending on the type of lender.
Loan Amount
It is never probable to get 100% loan amount against the gold value. Gold loans offered by the lenders can be as low as 60% of the gold value and can go up to maximum 85-90%. However, this is entirely subjective to the lending institution and its gold loan policies. The loan amount given is calculated using a gold loan calculator.
Repayment Process
The repayment process of gold loan is quite convenient. You need to repay the loan through regular EMIs during the loan tenure. Once the loan tenure ends and all remaining dues are cleared, the gold items offered as collateral are returned to the borrower.
Benefits
- Gold Loan is a secured loan. Therefore, even if you don’t have a good credit history, it won’t affect your chances of getting a loan.
- You have a choice to pay only the interest component. The principal amount can be paid as a lump sum amount during the end of the loan tenure.
- Individuals involved in agriculture can avail gold loan at a reduced rate of interest which can be as low as 8%.
- The documentation involved to avail a gold loan is minimal. You just need to submit your address proof and identity proof to avail the loan.
Conclusion
Gold loans require minimal paperwork with lower interest rates. You should opt for a gold loan when you are certain that you would repay the principal and interest dues within the loan tenure.
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