As we all know that gold is every Indian’s best investment. Whenever we have any money to spare or we think of making a small investment, we buy gold. But in the time of need we forget that we have a valuable investment lying around in our Bank’s lockers. It’s doing no good to anyone as we keep it hidden for years and years. Instead of letting the power of gold go to waste, we can use it in the times of our need.
You may need some capital to expand your business or you may need some extra bucks to send your child for higher studies, all could be taken care of with the gold you have lying around.
Today, we are bringing to you all the details of Gold Loans and the banks where you can avail them.
What is GOLD LOAN?
A Gold Loan is a loan which is secured against your gold ornaments. The borrower pledges his gold ornaments with the banks or the institutions which provide the facility of Gold Loan, in exchange of funds. The funds are secured as they are backed up by gold ornaments.
How does it all work?
When a borrower goes to a Bank or a NBFC(Non Banking Financial Company), he takes his gold along with him to pledge it as security. The lender i.e the Banks or the NBFC’s have appraisers or evaluators who very precisely value the gold on it’s weight, purity and other required gold standards.
After an evaluation, the lenders decide how much percentage of Gold’s value to be disbursed as loans. The processing time for gold loans is minimal and sometimes the loan is disbursed the very same day.
- Minimum and maximum age: 21-65 years
- Upto 50 Lakhs but many banks restrict their amounts to 10 lakhs.
- Employment type: Both salaried and self employed are eligible for a gold loan
- Quality of gold: 18-24 carat gold is eligible for a loan
The amount and The Tenure
The amount of loan to be approved is based on the value of gold deposited by the borrower. Usually 75-80% of the value of the gold is disbursed as loan. Average market price is calculated as the closing price of 22 carat gold for the preceding 30 days. The Gold which is eligible for a loan should be 18 – 24 carat gold.
The tenure of gold loans are short and mostly between 6 months to 36 months.
What are the charges?
The banks charge interest on the amount of the loan to be disbursed. There are different rates which the banks or the NBFC’s offer. They range between 10 – 26 %. The best rates which a borrower can get ranges between 10 – 11.5 %.
Along with the interest, there are 2 other charges which apply. Processing fees and Prepayment or fore closure charges. Most lenders charge minimum processing fees but the prepayment or foreclosure charges can be tricky.
No one wants to keep paying unnecessary interest and sometimes, you make a pre payment for your loan or you can deposit the entire amount before the term ends. It is called fore closure. The lenders charge a certain amount to close your loan before it’s term ends.
Penalty for non payment of loan
The lenders have a penal rate which they apply in case the borrower fails to repay the loan on time. The percent of penal charge can be over and above the existing rate of interest or above the amount which is overdue. Most banks charge penal fee up to 2% p.a. over and above applicable rate of interest. Be careful while selecting gold loan schemes and do check the penal fee and other charges.
The Banks or NBFC’s who provide Gold Loans
Sbi, Muthoot, Mannappuram, HDFC Bank, ICICI Bank, Federal Bank, Canara Bank, Andhra Bank, Axis Bank, Induslnd Bank, Yes Bank, IIFL, PNB are major Gold Loan lenders.