Gold Loan
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
Gold loan is a secured loan issued by lenders against gold as the undersigned asset. Gold loan gives an opportunity for people to liquefy the value of their jewelry items and use it for financing purposes.[br]
The loan process begins once the gold is deposited with the lenders. After checks pertaining to the quality of gold including a ‘purity’ check, lenders may offer loans for as high as 80% of the gold’s worth. While the gold market has only shown an ascent, lenders still consider the risk that gold carries and thus are reluctant to issue more than 80% if the value. Gold loans are issued by banks and non-banking companies.
Features of a Gold Loan
Being a secured loan, gold loans must be sought with a careful assessment of one’s payment capabilities or else the gold might get forfeited. The lenders offer gold loans after much consideration and tend to ask about the purpose of the loan. Many banks impose reasonable restrictions against the loan money being used for stocks trading. In comparison, private lenders are slightly moderate in issuing any such restrictions.
Gold loans come with higher interest rates and have a processing fee as well. There are instances where the interest rates go as high as 27% per annum. However, the private lending businesses, especially new entrants, offer lower rates and gold loans in strategic ways such as without levying any processing fess.
It is fortunate that most lenders do not charge any evaluation fee even when the loan amount is based on the quality of gold. They prefer to play it safe by offering a lesser amount of loan than the gold’s actual value. Most loans span three months to 12 months and the borrowers have the choice of prepaying at any time. Non-banking companies let borrowers choose their terms as well.
Be Careful With Gold Loan[br]
Borrowers need to ensure that the loan they take against gold is not meant for pure consumption or speculative purposes. They need to exercise caution with their investments or else they may end up losing the gold.
Another thing is to ensure there are no missed payments otherwise the default penalties can take the gold loan amount to an unmanageable balance. This has an inevitable impact: it will spoil your credit score.
