How to take a Loan against Gold?

Loan against gold is an easy process wherein you need to pledge your gold ornaments. to the lender (bank or the NBFC) and in return get a loan at a predetermined rate of interest. Such loans are commonly referred to as gold loans. These are secured loans that are procured in exchange for gold jewelry. Taking loan against gold in unexpected crisis is a way better option than applying for a personal loan, but only if you have a considerable amount of gold to keep as collateral. The process to take a loan against gold is fairly simple and less time-taking. Also, documentation and the paperwork involved in the gold loan are less intrusive as compared to other loan types. 

Here’s how you can take a loan against gold

Earlier there were just a few firms and local gold loan providers which offered loan against gold. However today every bank and Non-Banking Financial Institutions offer gold loans at an attractive interest rate. 

Documentation

Borrowers applying for a loan against gold need not have to furnish a huge list of documents, just an income or address proof or sometimes both are required. Furthermore, a gold loan requires no credit score. This is the reason why gold loans have been gaining popularity nowadays. The documents required in the process of taking a loan against gold are:-

1. Duly filled application form

2. One passport sized photograph

3. An identity proof (Voter ID/Pan Card/Passport)

4. Address proof (Ration Card/Passport/Electricity Bill/Rent Agreement/Driving License/Passport)

Quantum of loan against gold

Traditionally, you can avail up to 60 percent of the value of gold ornaments as a loan. But some banks also consider factors such as purity of gold, the tenure of loan etc. to determine the amount of loan that is to be sanctioned. Plus, gold loan borrowers are also entitled to subsidiary benefits provided by the Indian government.

The evaluation of Gold

The procedure to evaluate gold differs widely across banks in India. But in general, all the hallmark jewelry is evaluated on the basis of purity, weight and the current market value of gold. The value of stones if embedded in the gold jewelry is not considered. However for any jewelry without the hallmark sign, the purity of gold is questionable hence the lenders may end up allowing a lesser amount of loan.

Deposit of Gold

Soon after borrower decides to sign up for gold loan and submits the duly filled application form, an agreement is signed between the bank and the customer, after which the gold coins or jewelry gets deposited with the bank and the loan amount is disbursed. Ideally, the bank keeps the custody of gold until the time the entire loan amount is repaid by the customers, which is generally 12-18 months.

Default in payment

In case the customer fails to repay the loan on time, the bank is free to sell the gold that is kept as collateral and balance out all loan dues as mentioned in the loan agreement. 

Processing fee and other charges

The banks do charge a loan processing fee and a gold valuation fee which is to be borne by the customer.

Interest rates 

The interest rates offered on loan against gold is more attractive than personal loans. But one important point that should be noted here is that the interest on the gold loan depends largely on the amount of safety you give to the lender which means the higher will be the amount of jewelry kept as collateral the lower will be your loan interest rate and vice versa. Generally, the interest rates on gold loans vary between 10% and 20%. Plus lenders also offer several schemes for the loan applicants at a reduced interest rate if the loan is repaid within a diminutive period of one month or so on.

Key features of a gold loan

1. Loan against gold can also be paid out by the bank in just one day if all the documents, application form, etc are appropriate.

2. On an average, borrowers get 60% of the values of gold that is kept as collateral but some banks do offer 80 to 90% of the gold value.

3. Availing a loan against gold does not mean that you are selling it for contingency. Once the entire loan amount is paid off, the bank returns your gold.

4. Loan against gold can be closed anytime you want by making the payment in full. There is no penalty for pre-closing the loan.

5. On an average, the loan against gold can be taken from 3 months to 3 years.

6. Individuals of a low-income group can also apply for this loan against gold conveniently if they do not qualify for other types of loan.

Applying for a loan against gold is a way better option than the personal loan as it offers faster processing, minimal documentation, zero pre-payment fees, and no EMI option. So now if you have a good amount of gold hoarded in your locker and you have immediate requirement of cash for your personal needs, it is good to make use of the gold instead of choosing personal loan option on higher interest rates.

12 Interesting Facts About Gold

India’s infatuation with gold is not a secret. For centuries, the glittering metal has been an integral part of India’s history, culture, religions, and traditions. In spite of increase in gold rates, Indians have not stopped to buy or invest in this beautiful and valuable metal. India’s love for gold is so much that the recent survey report by the World Gold Council shows that in the first quarter of 2017, the gold purchases made from India were accounted for a little over one-fifth of world gold jewellery demand. Indians may have an undying relentless love for gold, however, there are many facts that the Indians and many people in the world do not know about it. They may know the current gold rate but there are various interesting facts on its production and consumption that will for sure leave them amazed. To know more, read on.

1.    It is the most malleable and ductile metal in the periodic table. Even at its highest purity of 99.99 percent, it can be readily cold shaped to prepare 10 mm thick wires or 0.2 mm thick foil. Since it is soft, it can be highly polished. It can also be beaten into a very thin translucent foil.

2.   When a ray of light is incident on the surface of the translucent gold foil, the foil acquires reddish/yellow tinge. The light that passes through it is somewhat blue in color.

3.   It is one of the least reactive elements and therefore resistant to most acids and rusting. However, this yellowish metal can dissolve in ‘Aqua Regia’ (a solution of nitric acid and hydrochloric acid) and the alkaline solution of cyanide (a solution used for mining and electroplating).

4.   To change the color and strength of the gold, it is often alloyed with other metals such as copper, which is used to change its color from gold to rose gold. Gold’s purity is measured in ‘Karat,’ which is denoted by the letter ‘K’. The word is derived from the Arabic word “qīrāṭ,” which means ‘the fruit of the carob tree.’ The word also means ‘weight of 4 grains.’ Even in the olden times, the word was a unit of mass but was used to measure gold. The 18K gold has 750 parts of pure gold per 1,000.

5.     The gold nuggets are hard to find. They are even rarer than a five carat of diamond. Till today, ‘Welcome Stranger’ is the largest gold nugget that has been ever discovered. The nugget is 10 by 25 inches in size and was discovered in Australia by discovered by John Deason and Richard Oates on 5th February 1869. It was found about two inches below the ground surface and at that time was reported to yield 2,248 ounces of pure gold.

6.   Since the starting of the civilization, about 175,000 tonnes of gold has been mined by the mankind.

7.     In Cabarrus, North Carolina, the first gold nugget discovered was of 17 pounds. Also in 1803, when more gold was discovered in North Carolina, the first gold rush in the United States began.

8.    The Amersham Corporation of Illinois use the tiny spheres of gold to tag particular type of proteins. It is a method to know their functions in the human body, which will further help in the treatment of a disease.

9.     China tops the chart of top ten producers of gold in the world. South Africa was the crowning glory of the list until China overtook this position in 2007. According to a report by the USGS, in the year 2015, China had mined 455 metric tons of gold. Other countries that follow on the list include Australia, Russia, United States, Canada, Peru, South Africa, Mexico, Indonesia, and Uzbekistan.

10.  As per a report by the USGS, the gold production worldwide has only increased over the years. In the report, the gold production in 1994 was about 2,300 tonnes per year and in the year 2014, it reached somewhere near to 2,860 tonnes.

11.  Worldwide, gold is most commonly used in the form of gold jewelry. Therefore, the world gold consumption is measured by the gold jewelry consumption. Among all the nations across the globe, India is the biggest gold consumer. According to the latest report by the World Gold Council, in the first quarter of 2017, the gold jewelry demand from India was 92.3 tonnes as compared to 22.9 tonnes in the U.S. another country that closely follows India in the race is China.

12.  The gold rates have only increased with the time. In 2005, gold was about 57 percent cheaper than platinum. Even though over the last decade, the gold rates have increased to nearly as high as the price of platinum, the metal has still remained more popular among Indians than platinum. Even when the current gold rate in India is high, there has been no significant decline in its demand.