At first, glance, getting a gold loan may appear to be a simple and straightforward process. You may believe that all you have to do is go to a reputable gold lender’s showroom and promise your gold in exchange for a substantial sum of money. Did you realise, however, that there are a few things you should know before applying for a gold loan? Knowing this ahead of time will help you not only optimise the value of your gold but also assure that it is safe and secure and that you will be able to repay the gold loan and receive your gold back.

1. What are the advantages of taking out a gold loan?

You’re probably debating if a gold loan is preferable to the various sorts of loans on the market today. The following are some of the advantages of gold loans:

  • Taking out a gold loan requires very minimal documentation.
  • The interest rates on gold loans are significantly lower than those on personal loans and other unsecured loans.
  • When asking for a gold loan, you don’t have to worry about your credit history, employment history, age, or anything else.
  • There is no need to provide proof of income or credit history.
  • There are a variety of repayment methods available.
  • Prepayment on gold loans is normally not allowed, though certain lenders may apply a prepayment penalty of up to 1% of the outstanding loan amount.

2. Where can I get a gold loan?

While you can get a gold loan from a small-time jeweller or a pawn shop, which are prevalent in India, it is safer to get a gold loan from a reputable bank or a government-regulated Non-Banking Financial Company (NBFC). As a result, you can rest assured that your gold is in good hands. There are non-banking financial companies (NBFCs) that specialise in gold loans such as Ruptok that offer appealing interest rates and other benefits to borrowers. Before determining where to get a gold loan, it’s best to evaluate the features and interest rates of various banks and NBFCs.

3. What are the different gold loan repayment options?

Gold loans provide you with a variety of repayment choices, including:

EMIs (Equated Monthly Instalments) are monthly payments that must be made on a regular basis.

Bullet payments, in which the loan’s interest component is subtracted from the loan amount upfront. This, together with the loan amount, must be repaid at the end of the term.

Interest first, principle later refers to a loan in which the interest component is paid first as an EMI during the loan term and the principal component is paid later at the conclusion of the term. At the moment, only NBFCs provide this service.

4. What kind of gold are acceptable as pledges?

The higher the purity of the gold, the higher the valuation, and hence the bigger the loan amount you will receive. Lenders require a minimum purity of 18 karat gold. Also, if you pledge jewellery with gems or precious stones placed in it, the value of the gems or precious stones will not be taken into account when determining the loan amount. For the gold loan, just the gold’s worth will be taken into account.

5. How much will I be able to borrow in exchange for my gold?

The amount of a loan you can get against your gold varies depending on the lender, but most will give you up to 90% of the gold’s worth as a loan. No lender will give you a loan for the full worth of your gold.

A gold loan is one of the quickest and easiest loans to obtain if you have the necessary resources. Knowing the crucial criteria listed above can assist you in making the right selection for your gold loan, ensuring that you get the greatest loan amount while also keeping your gold safe and secure.