What Are The Procedures, Merits And Demerits Of Gold Loan?

 Almost every house in India has some gold resources that are lying in their lockers. These resources can be used to get funding when you are in need of money urgently. There are several banks as well as financial institutions that offer loans against gold. You can use these resources and receive immediate funding. Before you apply for a gold loan, you must be aware of its procedure, merits, demerits.

What is the Procedure for Applying for a Gold Loan?

Usually, the procedure of applying for a gold loan varies from lender to lender. The idea behind the gold loan is very simple. All you have to do is pledge your gold and get the loan amount in return. The lender checks the purity of gold and determines its weight based on which the market value of gold is evaluated.

As per the rules, loans against gold can be sanctioned up to  80 percent of the evaluated value of gold. After evaluating the value of gold, the documents are verified and you are good to go for getting the cash for gold.

You can even apply for a loan against gold online through the lender’s official website or mobile application. Even in the online method of loan against the gold, you will have to visit the lender at least once for depositing the gold articles. Once you deposit the gold articles, you can link your bank account with the mobile application or lender’s customer portal. So, remember that whenever you need money urgently, you can get cash for gold. 

What are the Merits of a Gold Loan?

●          Faster Processing

A loan against gold is considered to be a secured loan that possesses lenient criteria for eligibility and even minimal documentation. There is no requirement for a credit score in order to apply for a gold loan. Due to this reason, the lenders usually disburse the loan in a span of a few hours. People who are eligible for getting cash for gold could receive the loan even in a few minutes.

●          Lower Interest Rate

Gold loans are much more secure than personal loans and even the rate of interest is lower for gold loans. Furthermore, if you are adding another asset as collateral, then you can decrease the interest rate further. You can also check the muthoot gold loan interest for you.

●          No Processing Fees

There are several NBFCs and banks that levy zero processing fees while issuing gold loans. The usual processing fee that is charged by the lender is also 1% at the most.

●          No Foreclosure Charges

Some of the lenders do not levy any charges on prepayment while some of the banks are charging a 1% penalty for prepayment.

●          Income Proof is not Needed

There is no need for income proof for the lenders while providing a gold loan as the loan is secured against gold. Due to this reason any person can apply for a gold loan even though that person is not earning.

●          No Requirement of Credit Score

Most of the loans ask for your credit score but this is not the scenario while taking a gold loan. In the case of other loans, the loan amount is provided to the borrowers on the basis of that person’s credit history as well as repayment capacity. In the case of gold loans, the loan amount is solely dependent on the market value of your gold articles.

What are the Demerits of a Gold Loan?

●          Loan-to-Value-Ratio

When you take a gold loan, you will receive a certain percentage of the market value of gold articles as a loan amount. LTV (Loan To Value) ratio is used to decide the loan amount. This ratio varies from one lender to the other and it could go up to a maximum of  80% of the market value of gold articles. For instance, if the market value of your gold is Rs. 10 lakh, then you can receive a maximum loan of Rs. 8 lakhs.

●          Due to Loan Default, you can Lose your Gold

If there is any case of gold loan default, then the lenders possess the legal right to freeze all your assets and auction them. They can sell all of your assets in order to get the outstanding gold loan amount.