Gold is one of the most precious and celebrated metals in India. Buying and gifting gold is an old tradition of our culture. However, the service of Gold Loan has changed the scenario of how people use this metal. Nowadays, people buy Gold to overcome financial troubles in life.
What is Gold Loan?
Gold Loan is the fastest growing financial service in the banking industry. Majority of people have gold ornaments which are just lying in the bank lockers or at home. Thus, Gold Loan provides an opportunity for the people to unleash the worth of this valuable yellow metal by availing a gold loan against them. Also, Gold Loan Interest Rate is quite affordable and less in comparison to other services like a personal loan and home loan. Moreover, the process is very simple and hassle-free. The applicant just has to put gold ornaments in the bank in return for the amount of loan. After the loan is repaid by the applicant, the bank returns the gold ornaments to the customer in the same shape. Finally, There are a lot of banking and nonbanking organizations where a customer can approach for a gold loan.
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How does Gold Loan work?
Our country has about 10% of the total gold stock in the whole world. Thus, the majority of people own gold ornaments in India. Gold Loan is a service that helps people to get cash against the gold they own. The mechanism of this service is quite simple and clear.
- The applicant just has to pledge gold jewelry to the lender in return for the loan amount. After you take your jewelry to the bank, the in-house jewellers access your gold jewelry in terms of purity and weight.
- Then, according to the value of gold, the lenders give the loan seekers cash equivalent to around 70%-75% of the value of their gold.
- Now the lender has the possession of your gold ornaments until the full repayment of the loan amount.
- Finally, when you repay the whole amount of loan, the bank returns the gold in the same shape to the customer.
This is the entire process of the service of Gold Loan. Thus, the Documents required are quite minimal as the bank is majorly concerned about the quality and quantity of Gold.
What is Gold Loan Interest Rate?
Gold Loan is a service that provides its customers with cash at the best rate of interest. In contrast to other services like Personal Loan and Home Loan, Gold Loan Interest Rate is quite less and reasonable. On average it starts at 10.75% per annum and can go up to 24% per annum. Different Banks and NBFC’s provides different interest rate to the customers.
*Read more about Gold Loan Interest Rate and compare them.
How to Calculate Gold Loan Interest Rate?
The Rate of Interest is the amount that is charged on the amount of loan. The Gold Loan Interest Rate depends on the factors stated below:
Internal/External Customer: The loan seekers who have an account in the bank from where they want to avail the loan, then such customers are known as internal customers. Internal customers are given a rebate on the rate of interest charged by the applicant.
Amount of Loan: The loan amount is the major factor that decides the rate of interest that will be charged from the applicant. The Gold Loan Interest Rate is higher for loans with lesser amounts. Thus, the more the amount of loan the lesser is the Rate of Interest.
LTV Ratios – Furthermore, lending institutions charge a higher rate of interest on the gold loan with a high LTV ratio. Thus, the more the LTV of the gold jewelry, the higher is the Rate of Interest charged by the applicant.
Gold Loan Interest Rate of Major Banks
|Bank||Gold Loan Rate|
|SBI Gold Loan||11.50%|
|IIFL Gold Loan||11.75%|
|Allahabad Bank Gold Loan||11.75%|
|Muthoot Gold Loan||12.00%|
|Federal Bank Gold Loan||12.00%|
|Manappuram Gold Loan||12.25%|
|PNB Gold Loan||12.25%|
On What Factors Loan Amount Depends?
The amount of Loan disbursed depends on mainly two factors:
The Quantity of Gold: To begin with, the weight of gold is one of the main factors that decide the amount of loan disbursed to the customer. The weight is measured after subtracting the weight of the stones(if any) in the jewelry. Higher the quantity of gold more is the amount that can be given to the customer.
*Note: Minimum 10 grams of gold is required for loan approval.
Quality of Gold: Another factor that decides the loan amount is the quality of gold. The purity should lie between 18 Carat to 22 Carat. Therefore, the better is the purity of gold, the more is the amount of loan that can be approved.
*Note: 24 Carat Gold is not accepted for Gold Loan.
What are Different Gold Loan Schemes?
The banks provide different schemes on the basis of the purpose of availing a loan. The following are the schemes that banks provide to the customers willing to avail a Gold Loan.
Non-Agricultural Loan against Gold: To begin with, all the loan seekers who won’t be using the amount for agricultural activities are eligible for this scheme. All the people including Salaried, Housewives, Self Employed, Students, women who want to avail a Gold Loan fall under this category. There are different repayment options provided to the customers like Term Loan, EMI Facility and Overdraft facility.
Agricultural Gold Loans: This is a type of gold Loan that is provided to only farmers who want to use the money for the agricultural practices. This service is provided to the farmers at a discounted rate of interest. Also, the basic idea of this scheme is to provide finance to the customers for managing crop production expenses or to invest in allied agricultural activities. In order to avail an Agricultural Gold Loan, one should have evidence of farming in form of proof of agricultural land.
*Read More: Everything about Agricultural Gold Loan
What are Gold Loan Repayment Schemes?
There are three ways to repay the loan amount disbursed by the bank.
Bullet Repayment: Most of the people choose this option when it comes repayment of Gold Loan. In this service, the applicant just has to pay the interest rate during the tenure of the loan. Therefore the principal amount has to be paid at the end of the loan tenure. But, this option is provided to the customers availing short term loans. The interest rate is paid on a monthly basis through EMI’s.
Overdraft Facility: Next, this is a type of scheme that is famous among the self-employed people. As people owning a business have fluctuating money requirements. Through this service, one can withdraw money according to their needs. That is, the applicant can choose the amount from the total loan amount disbursed for which they want to pay interest. Thus, the interest is applied to the amount that is withdrawn by the customer. Finally, the customer also has an option to renew the loan after the completion of the loan tenure.
EMI Facility: Furthermore, this is another scheme that customers can choose for the repayment of the gold loan. In this option, a fixed amount is calculated that the applicant has to pay monthly. This value includes a part of the principal amount and the interest rate. This scheme is becoming popular among people.
Read more: Know Everything About Gold Loan Repayment
Gold Loan Per Gram
While planning to avail the service of Gold Loan, the first thing that comes in mind of a person is the amount of loan that will be disbursed on per gram of gold. Generally, lending institutions give 17,000 Rupees to 2,000 Rupees on per gram of gold. But it again varies on the purity of the gold.
Read More About Gold Loan Per Gram
Who All Can Apply for Gold Loan?
- First and foremost, the gold should be in the name of the applicant or family member.
- Secondly, the applicant should be a resident of India.
- Thirdly, The age should lie in between 18 years to 70 years(at the time of loan maturity).
- Next, the bank is not concerned about the employment status of the applicant. Thus salaried, self-employed, housewives, students anyone can apply for a Gold Loan.
What are the Documents Required for Gold Loan?
Identity Proof: Aadhar Card/Pan Card/ Passport/ Voter ID/
Residence Proof: Aadhar Card /Pan Card/ Ration Card/ Utility Bills on the name of applicant/ Rental Agreement of applicant/ Voter ID card.
Agriculture Proof: Agriculture Land Proof.
CIBIL Score Matters in Gold Loan?
No, the banks do not check the CIBIL Score of a person to approve a gold loan. Gold Loan is a secured service, hence, the bank is not concerned about the repayment history of a person. Because, even if the applicant fails to repay the loan, the banks can cover the loan amount through the gold ornaments that they have in their possession.
Read More: What is CIBIL Score?
Why Should One Apply for a Gold Loan?
Great Availability: First and foremost, Loan against gold is a secured service, therefore the processing of this loan is quick as the bank is mostly concerned with the quality and weight of the gold.
Low Rate of Interest: In contrast to services like personal loans, the gold loan has the least interest rate as banks keep security against the loan.
Negligible foreclosure charges: Generally, banks do not have any prepayment charges but some banks can charge a penalty of just 1%.
Safety of Ornaments: The ornaments are more secure with the banks due to the strict security In the banking institutions which is quite less at homes.
No qualification of Credit Score: As this is a secured loan, therefore, the applicant does not have to worry about bad loan repayment history.
Income-proof not required: The salary of an applicant is not an issue for availing a gold loan as it depends majorly on the weight and quality of gold available with the applicant.
No loan processing charges: Another advantage is that the applicant does not have to pay extra for this service as the approval solely depends upon the asset kept as security.
Flexible tenure: In addition to other advantages, the applicant can choose the tenure of the loan according to their requirements and needs.
Only payment of interest: Lastly, the applicant has the option to pay the principal amount at the end of the tenure and only the interest every month.
Read More: Gold Loan Features and Benefits
Gold Loan EMI Calculator
It is very important to know the amount one has to pay every month to the bank. Therefore, you have an option to estimate the EMI before availing a loan. You can do so very quickly. Just click below and get to know the amount of the EMI you will have to manage monthly.
Why Gold Loan Instead of Personal Loan or Business Loan?
Now, any person who needs instant finance must be wondering why Gold Loan over Personal Loan? There are many people in our country who have a low credit score or poor repayment capacity. Poor repayment capacity of an individual may refer to the monthly salary of the person which may be low from the point of view of the bank. That is, the bank may think that the person will not be able to pay the loan on time. Lenders often do not provide Personal Loan or Business Loan in such cases. This is the reason why gold loan is the best option for these people. All that the person needs to do is provide simple identity verification and the gold as collateral to the bank. Besides, Gold Loan Interest Rate is quite less in contrast to other financial services.
Why Will Banks Provide a Loan To a Person With Poor Credit?
Banks provide loans against gold to the people with poor payment history. This is because, in this service, gold is provided as collateral to the bank. The women are emotionally attached to gold. This encourages the borrower to repay the Loan as quickly as possible. Hence, the bank is sure that the loan will be repaid on time. Even if the customer fails to repay the amount of loan, the bank is not at loss. As the ornaments are confiscated by the banks to recover the amount of loan.
Read More: CIBIL Score: Healthy or Weak?
FAQ’s for Gold Loan
Ques1: What is Gold Loan Interest Rate Formula?
The Gold Loan Interest Rate varies in different banks. Mainly, it depends upon the amount of loan and LTV ratio of the gold. To check interest rate, Click Here.
Ques2: How to pay Gold Loan Online?
You have an option to pay a gold loan online through online repayment applications.
Read More: Best Methods of Repaying Gold Loan
Ques3: How does Gold Loan Work?
Gold Loan is very simple to understand as well as easy to avail. The Bank provides you with funds against your gold Jewelry. The amount depends upon the gold weight.
Ques4: Gold Loan is secured or not?
Ques5. When you don’t repay a Gold Loan amount?
Ques6. What is the best online platform to avail gold loan?
* For any assistance regarding Gold Loan, call us on 95920-46860, our trained Relationship Managers will solve all your queries.