What is Gold Loan?

Posted by KushiBL on March 24th, 2020

What is Gold Loan?  

Gold loan is a loan given by a bank or institution to an individual who pledges their gold jewelry for money. The gold should be within a range between 18 to 24 carats. The loan amount is a certain percentage of the current gold price, as well as the quality of the gold. This will vary from bank to bank and is typically up to 80 percent.

The bank will also require certain documents, after which the gold loan will be approved and sanctioned. To make the process easier and clear, availing a gold loan through a loan aggregator, Buddy Loan, can help fit your profile to the organization and disburse loans with very few necessary documents online.

Documents Required for Gold Loan

Different banks ask for a different set of documents. Some of the common documents required include Passport size photograph, PAN, Voter’s ID, Aadhaar card, passport, driver’s license, electricity bill, income proof, identity proof, and address proof, etc.

Key Features of Gold Loan

Taking a gold loan from a bank or a financial has some features which are more advantageous than a loan. These features include

Quick Disbursal
Minimum documentation required and faster processing time because the loan is secured by your gold.

No Restriction on Use of Loan
The loan can be used in any manner or for any purpose. As the loan is not for a specified purpose, the loan is not monitored. This gives you the flexibility to meet any immediate expenses

Secured Loan
Other than the pledged gold jewellery there is no need to provide any other collateral or guarantor required

Lower Interest Rates
As this is a secured loan, the interest rate is comparatively lower than a personal loan and other types of loans, the interest rates begins at 11.99% p.a.

Easy Liquidity
Gold jewellery is generally an idle asset lying at home or in the bank locker. Gold loans provide instant liquidity when an emergency arises or when an undeniable expense is anticipated.

Foreclosure of Gold Loan

The gold loan is considered a short term loan and has a tenure of 1 to 5 years. However, the Gold loan can foreclose the loan before the tenure lapses. While some banks do not charge a foreclosure penalty, some of the banks will levy a charge of 2% to 4% of the outstanding balance.

Final Word

Before you sign on the dotted line, it is advisable to check and compare the interest rate, processing fee, late payment penalties, pre-payment charges, and other hidden costs so that you are not taken by surprise when these payments are to be made.

While taking a loan, one should be sure that the loan can be easily returned. Defaulting on a loan will adversely affect your credit rating, and you will find it difficult to get another loan.