A gold loan is a secured loan. The bank or NBFC you applied for the loan will accept the gold as security, against which the funds would be disbursed. The gold jewellery/coins will be returned once the loan is repaid. There are various uses of a loan against gold. The financial institution does not restrict the purpose for which the funds could be used, thus, the borrower has complete freedom to utilize the loan amount for purposes he/she deems fit.
Some of the banks offer special gold loans for business and agricultural purposes. There are loan offers for women customers, wherein the funds are given to support their entrepreneur dreams. Many of the financial companies may restrict the usage of funds to certain purposes alone and not grant the same for any speculative reasons. However, if you intend to use gold loan for anything legit, then there will not be any hindrance in getting the loan approval.
Why to Take a Gold Loan?
Most of us choose gold loans for an emergency reason, such as a medical treatment, home repair etc. As this loan can be given the same-day of its approval, many opt for it. The minimum amount you can borrow is Rs. 10,000 and maximum amount can go up to Rs. 2 crore or more. Depending on the gold weight and its purity, a loan amount will be decided. Financial institutions will accept gold of 18-24 carat. The repayment tenure is up to 36 or 48 months at the maximum. Shorter tenure of up to a year is also available.
Banks and NBFCs are ready to provide 75% of the gold’s value, as loan. Documentation process is easy and you need to provide only identity and residence proof. Both gold coins and ornaments are accepted. Moreover, the eligibility criteria are also less stringent than other unsecured and secured loans. There is no check on credit score. However, credit check could be necessary in case the loan amount is huge.
Let us understand some of the reasons for which a loan against gold is usually taken:
Secured loans such as those against gold may carry a lower rate of interest than personal loans. This is why, to meet the expenses of a marriage, many choose a gold loan. Since most of the Indians do have some amount of gold with them, the asset becomes a credible means to garner funds.
- Travel Trip
Do you have a travel trip to make? Why wait for the right time to get the funds, when you can choose a gold loan for travel. Be it an urgent or planned travel, you can generate funds against your gold jewellery for the same.
- Small Educational Expenses
An education loan is the best way to get funds for degree courses. However, not every expense related to education need to be huge. Sometimes, you may require a few thousand rupees for an assignment or project or maybe you need funds for a vocational course not covered under major education loan schemes. In such moments, you can opt for a gold loan.
- Home Renovation
Home repair and renovation cannot be avoided. The quickest way to get necessary funds for the repairs is to opt for a loan against gold. If need arises, you can use the funds partly for repair and remaining amount for other purposes such as upgrading furniture, purchasing new gadgets for the house etc.
Medical care is of the utmost importance. For an emergency care, you cannot wait for days to get loan approval and arrange money for the treatment. A gold loan can come as a timely rescue and provide you with the money you require to pay for any medical treatments.
The above-given information will certainly help you understand a gold loan better. It will also tell you how to make the best use of a loan against gold in India.