Gold Loan

Gold Loan is a secured loan where you take a loan from the lender by pledging gold ornaments. Loan against gold acts as the quickest way of getting funds to fulfil your personal or business requirements as the loan disburses the same day. Most of the banks finance gold loans upto the maximum limit of 75% of the gold’s value. Currently, bank gold loan per gram is ₹ 4,983. You can repay the loan through EMIs, bullet repayment option or overdraft. After the repayment, you get back your gold which was mortgaged earlier.

• Faster processing: Gold loans are secured loans, and thus the eligibility criteria is very lenient with minimal documentation. Only KYC documents are required for loan approval, and hence, the disbursement of the loan is very quick within a few hours. The quick disbursal of the gold loan makes it a great option in case of emergency.
• Multipurpose loan: Gold loan is a multipurpose loan and can be utilized for various purposes like financing a wedding, education, travel, purchasing gadgets, renovating home and any other purpose provided it is legal.
• Low-interest rate: Gold loan interest rates are comparatively lower than other unsecured credit options like personal loan. Banks and financial institutions provide gold loans to the priority sector as well like agriculture at lower rates. This is called an agricultural gold loan.
• Low processing and foreclosure charges: Some banks do not charge any processing and prepayment charges on gold loans and some charge very low fees and hence make it an affordable option.
• No income proof and credit score: Banks and NBFCs usually do not consider income proof and CIBIL score of an individual while reviewing the application. So, if a person does not have a fixed income and good credit score, then also he or she can manage to get a gold loan. In a gold loan, the loan amount is sanctioned based on the market value of the gold.
• Easily Accessible: Gold loans are easily accessible. Anyone who is above 18 years old and has gold can opt for gold loans irrespective of CIBIL history and income.
• High Amount Eligibility: Gold prices are soaring, and the rising gold price further helps borrowers in getting a better gold loan rate per gram.The gold loan per gram today is Rs ₹ 49,830

You are required to provide proof of residence and identity proof for applying for gold loans.

• Identity proof: Aadhaar card, PAN Card, Voter’s ID, Passport, Driving license, etc.
• Proof of Residence: Aadhaar Card, Electricity Bill, Ration’s Card, Passport, Driving License etc.
• Signature proof
• Photograph

Gold loans are considered the easiest loans since they can be availed with minimum eligibility requirements. While the other loans are restricted to occupation and credit score, gold loans can be availed by anyone. The general eligibility criteria to avail of a gold loan is listed as follows:

• The applicant must be aged above 18 years of age.
• Gold loans can be taken by people of all occupations and even by unemployed people.
• The pledged gold must meet the purity mark of at least 18 karats of gold.
• The gold can be in the form of gold jewellery, or ornaments.

To get a loan against gold, you have to submit your gold jewellery as collateral with the bank. The procedure for gold loan and gold loan details is as follow:

• Check Purity and the Type of Gold Accepted
  The first step is to check the type of gold accepted by the banks for loan. Most banks give loans against gold jewellery only. The purity of gold that you provide as collateral should be 18 carat to 22 carat.
• Check Eligibility and Select Bank
  The next step is to check the loan amount eligibility. Gold loan eligibility is calculated on the basis of the weight of gold or gold jewellery, purity of gold, LTV ratio and current market value of gold. Select the bank that offers the maximum loan amount at the lowest interest rates, processing fees and foreclosure charges.
• Apply for Loan
  Once you have finalised the bank, you can apply for a gold loan online at the bank's website or at a marketplace like MyLoanCare or offline by visiting the branch. Once you apply for a gold loan online, the bank's representative will call you to confirm the details and fix an appointment.
• Documents Verification
  An individual needs to carry proof of residence and proof of identity to the branch along with the gold ornaments. Bank authorities verify the documents for the gold loan.
• Gold Purity Check
  After the documents verification, you have to submit the gold to the bank. The designated authority of the banks checks the purity of the gold (18 to 22 carat) and weighs it based on the market value of the gold.
• Loan Disbursement
  Once the financial institution is satisfied by the documents and the purity of the gold, then they will disburse the gold loan according to the LTV ratio and secure your gold as per the guidelines of RBI.

• Bullet Repayment: This is one of the most popular repayment options offered by gold loan banks and NBFCs, where the entire principal amount is repaid at the end of the tenure. This repayment option is more prevalent for shorter tenure jewel loans of less than 6 months, as this allows you to utilize all borrowed funds for the required purpose and hence, save you from the burden of repaying principal every year. Key Features of such schemes are:
  • Loan amount is repaid at the end of the tenure.
  • Interest is calculated on a monthly basis, with an option to pay interest only EMIs every month, where you pay monthly interest in the form of EMIs.
  • Some banks allow a lower LTV of 65% on such schemes compared to the maximum LTV of 75% on other loan schemes.
• EMI Scheme:  Though not very popular earlier, this scheme is increasingly being offered to jewel loan borrowers. You are required to pay monthly instalments or monthly EMIs to banks. This scheme is especially popular for longer tenure gold loan schemes with greater loan amounts. Key Features of such schemes are:
  • Lowest EMI for a ₹ 1 Lakh loan is ₹ 2,488 at the lowest gold loan interest rate of 9.00% and maximum tenure of 4 years.
  • Attractive LTVs of upto 75%
  • Banks call for 6 months PDCs for EMIs. Some banks exempt the borrowers from PDC requirement for larger ticket size loans
• Overdraft Scheme:  This scheme is specially designed for businessmen and self employed who have fluctuating requirements for funds. The gold loan overdraft scheme allows you to withdraw any fund requirements or deposit any surplus in overdraft requirements within a pre approved credit limit. Interest is charged only on the utilized portion at any given point of time. Key Features of overdraft schemes are:
  • Has an overdraft facility that allows deposit and withdrawal of funds during loan tenure
  • Interest expenses are minimized as it allows the borrower to deposit funds in the account when he has surplus funds
  • Available on all ticket sizes, though will be more suitable for relatively larger ticket size loans
  • Also comes with an option to renew the limit at the end of the tenure by paying processing fees

Agricultural Gold Loan

These are loans extended to farmers and agriculturists against gold ornaments to provide them finance for crop production expenses and investment purposes in agriculture or allied agricultural activities. Key Features of such loans are:

• Evidence of farming activity in the form of proof land records is required.
• A written undertaking by the borrower on the purpose for which you intends to use the loan is required. Banks may also monitor the end-use of such loans.
• Loans extended for agriculture are categorized under priority sector lending and are eligible for interest subvention schemes from the government, which reduces the interest cost to the borrower.
• These loans are allowed generally for a maximum period of 3 years.
• Some banks also offer the option of overdraft facility on such loans.
• The interest Rate on agricultural gold loans ranges from 8.00 to 10.00 %.

Non-Agricultural Gold Loan

Non-agricultural gold loan is a loan extended to salaried, self-employed, businessmen, women, retired officials- in short to all who own a gold ornament. However, to avail of a loan, you have to pledge your gold ornament. Key features of this loan are discussed above.

✅How much gold loan can I get?

Loan amount on gold is dependent on the value of gold and the Loan-to-value ratio, which is set by the banks. The higher the gold value and loan-to-value ratio, the higher the loan amount. For example, Mr. X wants to take a loan against the gold worth ₹ 2 Lakh. Bank A offers 90% of LTV while bank B offers 80% of LTV. So, X can get a loan of ₹ 1.80 Lakh from Bank A or ₹ 1.60 Lakh from Bank B, respectively. LTV ratio varies from bank to bank. Generally, it lies in the range of 70% to 85%. Gold loan per gram rates is different for different banks.
Usually, gold loan companies like Muthoot and Manappuram offer higher gold rates per gram. The current maximum gold loan per gram for HDFC is ₹ 3,442 and he highest gold loan per gram for Yes Bank is ₹ 3,442.

✅How can I get a gold loan?

Individuals who are residents of India and are above 18 years old can apply for a gold loan. All you have to do is provide the gold metal of 18 carats and above in the form of security and submit KYC documents to the bank.

✅How can I get the maximum amount of gold loan per gram?

It is advisable to choose the mortgaged jewelry with the help of following guidelines:

• Specially minted gold coins of banks of up to 50 grams or 22 carat gold ornaments will offer you the gold loan highest rate per gram.
• If you offer hallmarked jewelry, you will be charged lower processing fees and hence, your cost of loan will be lower.
• High purity gold ornaments of 22 carat will help you get a higher amount of gold loan.
• Ornaments with a lot of other stones including diamond, pearls, ruby etc might not fetch you a good loan amount as banks deduct the weight of these stones to calculate the net weight of gold and hence, the loan amount you will be eligible for can reduce depending on the net weight.
• Avoid pledging your mangal sutras, as many banks as a policy do not accept mangal sutras as a valid mortgage, with the exception of a few banks who accept mangalsutras without black beads as a valid security.
• Try to use larger pieces of jewelry in place of smaller items of gold.

✅Can I extend my gold loan?

Yes, you can extend the gold loan if you are not able to repay the loan within the tenure. However, there are few lenders who allow gold loan extension and few also name it gold loan renewal.

✅Does gold loan increase credit score?

Gold loans can have a positive impact on your credit score or credit report if the loan is repaid on or before the tenure. Gold loan is like any other loan early payments will definitely help increase credit score as well.

✅Can I Renew gold loan Online?

Yes, there are few banks which allow you to renew a gold loan. For example with ICICI bank you can easily renew the gold loan online by using the ICICI bank mobile application and then selecting the loan account number.

✅Which bank is best for gold loan?

Muthoot is the best bank if you want to avail a lower interest rate because these banks offer loan at 6.90%. HDFC Bank can also be your option because it is entrusted by borrowers for its customer service. These two are the best gold loan bank.

✅Against which gold jewellery can you borrow?

You can get a gold loan against a jewellery which is made of 18 karat, 20 karat, 22 karat. However, you cannot pledge mangalsutra and banks do not evaluate diamonds and precious stones while calculating the loan amount.

✅What is the maximum tenure for a gold loan?

You can avail of a gold loan for maximum 36 Months. Remember that tenure for every bank is different, for example, the tenure of HDFC Bank is 24 months and Muthoot Finance is 36 months.

✅How can you assure that your gold is safe with the particular bank from where you get the loan?

To be assured that the gold which you have pledged is safe you can check the rating of a bank or NBFC. Also, you have a gold loan comparison on the basis of customer rating.

✅Is it good to take a loan on gold?

Yes, you can take a gold loan if you have gold jewellery to pledge and you need financial support. This loan helps improve the credit score, only if all the EMIs are paid on time.

✅How much loan amount can I get at the current gold price per gram?

You can get a maximum loan for Rs 20000000 as the current gold loan highest rate per gram is ₹ 3,442. The maximum loan amount for every lender is different, check before applying for a loan.

✅Which banks or NBFCs offer 5 lakh loans on gold at low-interest rates and processing fees?

HDFC Bank, Yes Bank are the banks with whom you can apply for a gold loan. These are the banks that offer loans at the lowest interest rate and processing fees. The interest rate is 9.00% and 9.00%, respectively.

✅How can I get an Rs. 2 Lakh loan against my gold jewelry for home improvement?

To get a loan for Rs 2 lakh you need to have jewellery of above 65 grams and it should be 22 karat. If the purity of the gold jewellery is less then you will need more gold.