Gold loan

Shall I sell or take a loan against gold ?

Gold has a deep-rooted significance in Indian culture and is considered as a symbol of Goddess Laxmi. In India, the precious yellow metal is purchased at auspicious occasions during festivals like Diwali, Dhanteras, Akshaya Tritiya etc. People usually give gold, a valuable metal to their daughters during their marriage, and thus it holds a significant value. Not to forget why people are so reluctant to sell their gold during times of financial emergencies. People have an emotional attachment with the gold, and thus they rarely sell it in times of needs.

Taking a gold loan: If you too have an emotional value attached with the gold, you can instead choose a gold loan against gold.

What is a gold loan?

A gold loan is a secured loan taken against the mortgage of gold, mostly gold ornaments for a flexible tenure. You can use the gold loan to meet personal as well as financial business requirements such as wedding expenses, medical emergencies or travel expenses etc.

Features of a gold loan:

  1. Low-interest rates: The value of gold exceeds the amount of gold loan provided by financial institutions. Thus, in case the borrower does not repay the loan on time, the risk lies on his shoulder as banks can quickly sell the gold in case of default. As a gold loan is a secured loan against a valuable metal; thus, financial institutions may provide you with the loan at a lower interest rate than a personal loan. SBI bank may provide gold loan interest rate at 7.75%.
  • Gold loan documents: You need to submit documents for Identity proof, Residence address and ownership proof, Photo identity proof and passport size photograph to get a gold loan. Banks and non-banking financial institutions do not require you to submit documents for income proof or CIBIL. Thus, if you have a low credit score, you can easily avail the gold loan.
  • Loan to value ratio:  RBI( Reserve Bank of India) has set guidelines to provide up to 75% of the value of gold as a gold loan. You must, however, note that the bank’s criteria for evaluating the gold rate may vary. For instance, some financial institutions may consider a fortnight gold loan rate. Others may consider weekly gold loan rates. However, most of the institutions may provide gold loans for 18 to 22 K of gold. The value of gems is not considered while evaluating the gold. Also, banks mostly provide gold loans against gold ornaments as they have a more emotional value attached.
  • Flexible repayment options: Unlike other loans, a gold loan comes with flexible repayment options; Bullet repayment, Overdraft facility or EMI facility. Under the Bullet repayment method, you have to pay only monthly interest. The principal amount is paid at the end of tenure. You can also choose to repay both the principal amount and interest every month. Banks also provide overdraft facilities against gold.
  • Instant fund disbursal: The process of availing a gold loan is easy and quick. Most of the institutions are providing gold loans in the digital space. They also offer doorstep evaluation of gold which has made gold loan more accessible.
  • Security of gold: Any gold pledged as collateral is kept safely with the bank at the bank’s locker. They will return your gold as you repay the gold loan.
  • Tenure of the gold loan: A gold loan can fulfil your short-term finance requirements from 1 day to 36 months. You can choose the gold loan tenure as per your needs.

Conclusion: Thus, availing a gold loan is a better option to fulfil your urgent needs such as any home repairs, any medical emergency rather than selling your gold as you may not always get the right price for your gold.

Radhe Gupta
Radhe Gupta is an Indian business blogger. He believes that Content and Social Media Marketing are the strongest forms of marketing nowadays. Radhe also tries different gadgets every now and then to give their reviews online. You can connect with him...