You must have heard about gold loan, but do you know which type of gold the banks and NBFCs accept as security to grant funds? Are you are aware of the things that the financial companies keep in mind before offering the funds? What are the essentials of a loan against gold and how are the assets evaluated? Will the gold jewelleries/coin you submit to the bank, receive apt security?
To get the answers for these questions, you will have to read the following pointers.
- Type of Gold Asset Accepted by Banks/NBFCs
Financial institutions usually accept gold jewellery and coins. They do not accept coins that are furnished by retailers, but those which are issued and sold by recognized banks. Each coin should not be over 50gms. Gold bars, biscuits, and chunks are not acceptable. In ornaments, Mangalsutra is not accepted by many banks and NBFCs.
The minimum amount you can borrow is Rs. 5,000 and maximum amount to borrow is Rs. 2 crore. If you do not have the bill of the ornaments, do not worry as bill is not mandatory. Most of the loan providers will accept hallmarked and non-hallmarked gold items for the loan.
- Considerations for a Gold Loan
Do remember that only the gold content in the jewellery is kept in mind to calculate the loan amount. Any other precious material, metal or gem in the ornament will not be taken into account. Anyone who is over 18 years of age can apply for a loan against gold. The tenure of the loan is up to 36 months, and in some cases it could be a year.
Employment history or type of employment of the borrower are not of a concern, thus, you can easily get this loan. Credit check is not done, until the amount needed is huge. Also, you have to provide only residence and identity proof to secure the loan.
- Importance of the Purity of Gold
The most important aspect a financial institution considers before giving a gold loan is the purity of the gold asset. It should not be less than 18 carat. Thus, if the asset is between 18 and 24 carat, it can be eligible as security for the funds. Service and making charges will not be counted in the evaluation of the gold value. The banks can offer up to 75 percent of the gold’s value as per the market rate of today.
- Security Given to the Gold Asset
The gold jewellery, which you pledge to the bank, will receive highest security. The asset will be kept in a strong safe or room, which would be built to the specifications and standards of commercial banks. Also, the pledged assets will be insured to their complete value. For added security, surveillance technology will be utilized so that no theft or breach of security takes place.
- What if You Default at Repayments?
If you do not pay timely EMIs, then the financial company will send you reminders for the overdue payment. Even after repeated reminders, if the overdue amount is not paid, then the asset will be liable for auction. However, this step will be taken only if periodic reminders served to you have not been satisfied. The bank will send auction intimation to you, prior to the auction. To avoid such contingencies, you can reset your account before or on the due date or make sure the payments do not remain pending for a long duration.
By considering the above-mentioned information, you can take an informed decision to apply for a gold loan online or at a bank/NBFC branch.