A Complete Guide to Gold Loans in India
22 Nov 2022
Table of Content
For generations, people have exchanged gold for cash. In addition to being an auspicious asset, gold is significant as a source of financial stability. But what are gold loans? Gold loans are secured loans where your gold items are pledged as collateral to obtain cash for your necessities and emergencies. Gold loans are more affordable than credit cards or personal loans, especially for those seeking short term finance. But before agreeing to a financial arrangement, full awareness is required.
The Bank of Baroda explains all the fine details of gold loans to help you make an informed decision when looking for a gold loan.
What are Gold Loans?
Gold loans are secured loans given by a lender to a borrower in exchange for gold-related items. Usually, a percentage of the gold's worth is offered as the loan amount.
In addition to a basic understanding of what are gold loans it is important to understand the gold loan amount per gram of gold, the value of the gold pledged, and other qualifying requirements that will all affect the credit amount granted.
Then, to have their gold objects returned, borrowers must pay back the loan in instalments (which might be monthly or may follow other predetermined repayment schedules, depending on the loan terms) over the loan's tenure.
Once you are aware of what gold loans are and how to obtain them, then you'll realize that Gold loans are the best ones to avail for critical events and expenses such as weddings or unanticipated expenses (If you are convinced you can repay the loan quickly, that is).
Types of Gold Loan at Bank of Baroda
Bank of Baroda gets you covered with the following gold loan options that you can avail of depending on your disposition and requirements:
1. Retail Gold Loan
In a retail gold loan, the bank offers the borrower a plethora of options for the gold loan. Other than for speculative purposes, the gold may also be used for personal needs like purchasing a car, paying educational fees, funding a wedding, or meeting other additional costs.
The advantages of a retail gold loan are:
- You can quickly convert the loan into cash
- No need to show proof of income
- These gold loans do not call for a guarantor
- CIBIL score is not a factor in pricing
- Low paperwork and quick processing
- Security of your gold items
The repayment structure for retail gold loans is a monthly interest charge. At any time during the loan's term, the principal will be returned in bullet payments. Visit the Bank of Baroda website to learn more about the Retail gold loans.
2. Agri Gold Loan
Agri gold loans serve several objectives for farmers, including female members for their needs related to agriculture or other fields. Farmers receive several advantages under this specialised gold loan.
The benefits of applying for an agriculture gold loan include no processing fees for up to Rs. 3 lakhs, lower ROI, and loan repayment depending on the farmer's revenue.
The repayment timeline will depend on the borrower's ability to generate income.
With a maximum moratorium term of 12 months, cash accrual dictates that loans for advances other than crop loans be returned in monthly, quarterly, or half-yearly instalments. Visit the Bank of Baroda website to learn more about the Agri gold loans.
Benefits of Gold Loan
Gold loans, when availed from reputed organizations’, give a plethora of benefits to the borrower. The following are some of the gold loan benefits:
- The paperwork is minimal because your gold is used as collateral for the loan. All you need are documents of your identification and address.
- No need to show proof of income.
- You have the choice to pay simply the interest component, or you can pay the principal in one lump sum at the conclusion of the loan's term.
- You can save a lot of money because the interest rates on gold loans are lower than those on personal loans.
- A gold loan is instantly processed, and the borrowed funds are disbursed quickly.
- Gold loans are convertible quickly into cash.
- This loan is secured. As a result, it will not affect your chances of acquiring a loan even if you have a poor credit history.
- You will pay nil or very little in processing fees for gold loans.
How Does Gold Loan Work?
Understanding how gold loan work is rather straightforward. The borrower must deliver the gold to the lender in the form of coins or jewellery, or to obtain a gold loan. One can get up to 75 % of the value of the gold articles pledged as a loan sum. Any Indian citizen who owns gold articles may apply for gold loans.
An evaluator will assess the gold item once you give it to the lender, who will decide on its quality and current market value. Once you've agreed to the loan amount and fees, you can start the documentation process.
Once your loan has been approved, the lender will keep the gold (possession, not ownership), and the money will be transferred to your bank account. In the payback process, the loan amount must be repaid, plus the lenders set interest rate.
The likelihood of a rapid price reduction or depreciation of gold is typically extremely low. Gold's worth is guaranteed to increase over time, as opposed to other assets that can be used as collateral for loans, further encouraging lenders.
How to Apply for a Gold Loan in India
Prospective borrowers must first apply to a lender for a gold loan. For a standard gold loan, the application must be completed on paper and delivered to the appropriate branch of the gold lending firm. This application may be made via the lender's website for online gold loans.
What are the documents required for a gold loan in India?
The following are the documents required for a gold loan in India:
- Proof of identity- This could be a PAN card, Aadhar card, Driving license, voter’s ID card, or passport copy.
- Proof of address- This could be either Aadhar card, Driving license, voter’s ID card, passport copy, Landline bill/postpaid bill/water bill/ electricity bill, or rent agreement (along with the most recent owner's electricity bill)
- Two recent passport-size photos
Eligibility for a Gold Loan
The gold loan eligibility criteria aren't demanding; take a look at the list below:
- Using gold jewellery as collateral allows anyone between 18 to 75 to apply for a gold loan.
- The candidate must reside in India.
- The self-employed, business owners, professionals, farmers, and traders are all eligible for gold loans.
- Possess the identification and address proof documents. A certificate of land ownership or any documentary proof is necessary in the case of a farming loan.
- Since the list of eligibility requirements above is only a broad overview, it is always better to visit the websites of your borrower to determine the precise requirements for a particular bank or institute.
How to Calculate a Gold Loan?
A relatively simple tool called a gold loan calculator can be used to compute gold loan interest. It is a computer-based calculator provided by the bank that will handle the challenging math involved in your gold loan on your behalf.
Just enter the necessary information for your gold loan, and you'll see either the loan amount offered or the monthly EMI you will need to pay in seconds. A gold loan calculator is also available from the Bank of Baroda on their website.
You merely need to provide information about the quantity, carat quality, and weight in grams of the jewellery you intend to pledge. The loan amount provided to you will almost immediately be displayed.
How will a Gold Loan Affect your CIBIL Score?
Gold loans give borrowers more freedom to use the money any way they see fit, such as for weddings, education loans, or other unanticipated medical problems, compared to conventional loans with predetermined periods or conditions.
When you need money right away, it will help you keep your CIBIL score high by applying for a gold loan rather than a personal loan. The gold loan has no credit score requirements.
A gold loan affect CIBIL score depending on your loan's terms and how you arrange your repayments. For instance, a gold loan could raise or lower your CIBIL credit score. Your credit record is requested from the credit bureaus when you apply for a gold loan or any other type of credit, and this process is known as a "hard inquiry" by the lender.
The issue arises when there are too many hard inquiries on your credit in a short time. It indicates that you are badly in need of credit. A few hard inquiries have no impact as such.
Other than that, when you miss a payment on a gold loan, the credit bureaus are notified, which lowers your credit score. Your credit score will rise when you pay off your loan on time and in full. It demonstrates your dependability and credit-worthy activity.
How to Repay Gold Loan?
A lender allows gold loan repayment in various ways:
- EMI (Equated Monthly Installments): With this option, the EMI and principal are paid off in equal monthly instalments until the entire balance is paid.
- Bullet payments: With this quick and straightforward technique, you need to pay the interest and a one-time payment to regain ownership of the gold.
- Pay the principal amount in full later and the interest as EMIs: This option calls for the interest on the gold to be paid via EMIs, with the final principal payment and return of the gold to the borrower occurring later.
- Option for partial payment: The option with the most customizability allows you to set the EMI amount and divides the principal amount into manageable costs for the borrower.
A gold loan is one of the best solutions to handle any financial unforeseen circumstances because it has so many benefits. The fact that you must pledge your gold to the lender is the sole drawback of a gold loan. As a result, make sure the loan is correctly closed and the repayments are made on schedule to get the maximum benefits.
The contents of this article/infographic/picture/video are meant solely for information purposes and do not necessarily reflect the views of Bank of Baroda. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Bank of Baroda and/ or its Affiliates and its subsidiaries make no representation as to the accuracy; completeness or reliability of any information contained herein or otherwise provided and hereby disclaim any liability with regard to the same. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Bank of Baroda or its affiliates to any licensing or registration requirements. Bank of Baroda shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
Key Benefits of Taking a Home Loan - A Complete A-Z Guide
A home is anyone’s dream. A small apartment is a dream utility a villa is a dream luxury. The best way to accomplish a dream home is through a home loan. You might fight shy of loans, but for building a home, falling back on savings is a bad idea. Not only is it time-consuming but it will deplete a chunk of your savings. A home loan is packed with benefits that not just help you to return debt on your asset but also help in making savings from taxes. While we discuss the home loan benefits, we will also offer an objective overview of the flip sides of the loan and how you can overcome them to sail through your loan period easily. A homeowner can also take the options of home renovation loans, especially during the festive season. While we discuss in-depth the benefits of a first-time home buyer loan, we will apprise you of all the related benefits of home loans. Let’s start with the most significant benefits of home loans in income tax.
Gold Loan vs Personal Loan - Which is Better & Why?
Financial contingencies generally come unannounced. Often, the only way to tide over such contingencies is by taking a loan. Whether you need to fund your sister’s marriage, or pay for a medical emergency, a loan can prove to be a lifesaver. While many types of loans are available in the market to meet your needs, personal loans and gold loans are two of the most popular ones.