Features & Benefits of Home Loan

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When you need funds immediately, you can look for using your available gold as security or collateral to attain the funds that you require. Gold loans by nature are secured by most of the banks as well as non-banking financial companies or NBFCs. The lender evaluates the gold’s present market value and decides the loan proceeds accordingly. Such a kind of loan assists you to get hold of cash instantly. Let’s analyse the distinct benefits and features of gold loan, loan application procedure and others.

What are the features of a gold loan?

Salient features of gold loan are as follows –

Attractive rate of interest – 

As gold loan by nature is secured, lenders charge a lowest gold loan interest rate than those levied on unsecured credit options. Thus, low interest gold loan is an important feature of gold loan products.

Zero credit score and income proof needs – 

Lenders do not need your score and monthly income details to provide you with a gold loan. They usually decide the loan value depending on the gold that you pledge as collateral or security.

Safety of pledged gold – 

Lenders tend to protect your pledged gold by simply storing it in a protective and heavy-duty vault. Once you make the repayment of your gold loan, they return the gold to you.

Loan to value or LTV ratio –

The RBI or Reserve Bank of India has capped LTV or loan to value ratio at 75 per cent. So, in the case you pledge gold equalling Rs 1 lakh, you must get the highest loan amount of Rs 75,000 on gold loan.

Minimal documentation – 

You can place the application for a gold loan with minimum documents like just address proof and identity proof to finish your KYC or know your customer procedure. Lenders do not need your bank statements or income proof generally to evaluate your gold loan eligibility. The major eligibility that decides whether to provide you the loan proceeds is the gold that you pledge as collateral or security. That is one of the major determining factors.

Versatile end use – 

You may make use of the loan proceeds to fund any expense without fretting about any end usage restriction.

Quicker processing – 

You may get funds on a gold loan within minutes. The lender ensures to weigh the gold and then accordingly disburses the loan proceeds instantly.

No pre-payment or foreclosure fees – 

You can make repayment of your gold loan principal amount and interest constituent at any time without fretting about the prepayment or foreclosure fees.

Also Check: Gold Loan Interest Rate

What’s the stepwise process to place an application for gold loan?

Below are the crucial measures that you must ensure to follow when you place an application for a gold loan option –

Choose a lender – 

The initial measure in a gold loan procedure is to choose your preferred lender. Make sure you select a reputed bank or NBFC who will protect your assets and return them once you repay the full gold loan outstanding dues in full by the end of the repayment tenure.

Gold assessment – 

Once you have selected your preferred financial institution, you must ensure to get your gold jewellery assessed. Distinct lenders provide distinct assessment options. You can approach the bank’s branch for assessment. An assessor can weigh the gold as well as conduct the know your customer procedure. The lender then informs you about the loan proceeds you can avail, the rate of interest applicable on the gold loan, and the repayment tenure. They usually can disburse the maximum gold loan value of 75 per cent. You even use the online gold loan calculator to calculate the gold loan amount per gram.

Evaluate the repayment tenure – 

Lenders permit you to repay just the interest constituent for gold loan during the repayment tenure. You can make repayment of the principal constituent in lumpsum form once the tenure for gold loan ends or anytime whenever you have cash in hand. This payment option is called the bullet repayment method. Most of the lenders provide a 1-year repayment tenure on their gold loan while if you opt for the EMI repayment option the repayment tenure may be up to 3 years.

Loan amount disbursal – 

Loan disbursal is the last step in the process for gold loan. Once you accept the proposed terms of the gold loan, the lender credits the loan proceeds to your savings bank account.

What are the important benefits of opting for a gold loan?

There are various advantages of opting for a gold loan that make this option attractive for many. The popular benefits are listed below –

Secured loan advantages – 

Most loans either are unsecured or secured in nature. Unsecured loans need no collateral; however, you have to meet the strict eligibility parameter. As gold loan by nature is a secured option, lenders need the collateral from your end as gold to approve the loan. However, they typically process the loan very easily. You do not require showing any income proof for the high value loan. Additionally, lenders charge a lower rate of interest owing to the pledged gold.

Zero requirement for credit score – 

The one and only condition you require to comply with to avail the gold loan is to possess quality gold. You can get a gold loan even if your score is poor. In fact, many lenders do not consider checking your credit score.

Reusing same gold repeatedly – 

Once you have made full repayment and received your gold, you have the choice to use the same gold to get another gold loan. As the loan proceeds are dependent on the market value of gold, you can even avail a higher loan proceeds the next time if the prices for gold rises.

Flexible repayment tenure –

Gold credit options are not amortised meaning you do not require paying the interest constituent and principal constituent every time you repay your loan EMI. Instead, you might just repay the interest constituent in loan EMIs during repayment and pay off the principal loan proceeds in lumpsum form when loan matures.

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