Gold Loan - A Rewarding Option for Safeguarding Your Financial Interests
Ever since the real value of gold has been brought to the cognizance of Indians, it has been crowned as the herald of wealth and prosperity. Being multidisciplinary in nature, it is being widely used for making exquisite jewellery as well as a source of monetary gains and security. Keeping the latter in consideration, an array of lucrative financial products including gold-backed securities, gold mutual funds, mining stocks, options and futures and more has been already launched in the capital market.
Apart from the same, another propitious option that has succoured millions in India for meeting their monetary needs or recovering from financial distress in times of dire is gold loans, where the metal gold is being pledged by the borrower as a security against the loan borrowed by him. Here's all that you need to know about gold loans.
A Brief on the Upsurge of Gold Loan Concept in India
Since the ancient times, gold was treasured as an equivalent to cash. The genesis of this concept can be detected in Southern India where the money lenders and landowners used to borrow money against gold while, keeping it as a collateral security. Adhering the same, the money lending institutions of the present era including Banks and NBFCs have started sanctioning gold loans by accepting the gold of customers as a pledge.
The Basics of Gold Loans
Gold loans are short-term and secured loans where the loan applicant pledges his accumulated gold (kept in the form of jewellery and coins issued by banks) as a collateral security against taking a loan from the bank/lender. Both nationalized and private banks along with NBFCs deploy this deposited gold as security in lieu of the potential payment default by customers. The sanctioned loan amount is generally a certain percentage of the gold value being pledged by the applicant.
As these are short-term, the repayment period generally ranges from a month to a tenure of few years. Thus, for the people in need of money to meet their immediate expenses and with the ability to repay within a short term, gold loans will serve as the ultimate option.
Salient Features of a Gold Loan
Gold Loan Eligibility
- Utility: A gold loan is capable of sufficing a myriad of financial needs such as medical emergencies, educational purposes and for making any kind of further investment as well. Generally, the purpose of taking the loan is not considered as a matter of concern by the lender while rendering the same.
- Security: The gold which, is being pledged by the customer to the financial institution or bank serves as a collateral security against the loan being availed by him.
- Fees: Usually, the processing fee, valuation fees, penalty charges for non-payment of interest or late payment charges etc. are some of the different types of fees and charges associated with gold loans.
- Repayment options: Generally, there are three options provided to the borrowers by lenders for repaying a gold loan, which are:
1) Equated Monthly Installments
2) Payment of the interest in advance and principal amount at end of the loan tenure.
3) Payment of the interest amount on monthly basis and principal amount at end of the loan tenure.
The eligibility of a customer to avail the loan is calculated on the basis of gold loan amount which, he will receive against the value of gold being pledged by him to the lender, LTV set by the banks and purity of gold. The gold price is based on the average price of 22 carat gold for past 30 days and LTV ratio being offered by the bank. The loan eligibility of the applicant with due consideration of the interest rate charges and term of the gold loan is evaluated for measuring the EMI of gold loan.
Gold Loan EMI Calculator
EMI of a gold loan is the amount which, the borrower needs to pay to the lender every month for repaying the loan amount. It is comprised of the interest component (calculated on the basis of interest rate, loan amount and tenure) and principal amount. The interest component is generally higher during the early months and gradually reduces over time. The EMI calculator serves as the significant tool for borrowers to estimate the monthly EMI for a specific tenure at a specific interest rate.
Top Gold Loan Providers in India
Being of the most trusted and prestigious banks of India, the Axis Bank renders a potential gold loan scheme which, guarantees immediate loan disposal. The minimum loan amount which, can be availed via this scheme is Rs.25,001 (twenty five thousand and one rupees) whereas, the maximum loan amount is up to Rs.20,00,000 (twenty lakh rupees) at an interest rate of 14.50 - 17.00%. Furthermore, the customers will be able to gain lucrative loyalty points on their transactions as well.
The gold loan scheme rendered by ICICI Bank features an easy loan disbursement process along with minimal documentation. This scheme offers a substantially high loan amount against each gram of gold which, is being kept as a collateral security and the maximum loan quantum worth up to a sum of Rs.15,00,000 (fifteen lakh rupees). The bank offer loans against gold under the propitious EMI scheme with an average interest rate of 12.00 - 16.50%.
Muthoot Finance is one of the pioneer gold financing companies in India that offers rewarding gold loan schemes with a minimum amount of Rs.1,500 (fifteen hundred rupees) and no maximum limit. It offers a gamut of various schemes, with an average interest rate of 12.00 - 24.00%, designed to meet the varied needs of different types of borrowers in India.
The Sampoorna Bharosa Gold Loan scheme, rendered by the HDFC Bank offers loans to the people in need at a lucrative interest rate and facilitates instant over-the-counter loan disbursement to borrowers. The minimum and maximum loan amount offered by the bank are Rs.50,000 (fifty thousand rupees) and Rs.50,00,000 (fifty lakh rupees) respectively at an interest rate of 6.70 - 15.65%.
Manappuram Finance Limited
Manappuram Finance Limited is another premier and esteemed NBFC in India which, offers propitious gold loans at substantially lower interest rates for a minimum and maximum amount of Rs.1000 to Rs. 1 crore respectively. This renowned financial institution offers an array of gold loan plans including the Bullet Repayment scheme and EMI scheme at an average interest rate of 12.00 - 26.00%.
Financial Planning undoubtedly requires concrete knowledge about the market scenario and strong analytical mindset. Thus, before applying for a gold loan, it becomes a requisite for you to acquire ample knowledge on the various types of schemes available, evaluate the effect of possible contingencies, set your financial objectives to make the right move.