Gold is one of the most sought-after assets in India and around the world. For its ornamental use and as a reliable investment source, the yellow metal is a household favorite in the Indian subcontinent. Indian households lead the world in gold reserves with a massive domestic holding of 24,000–25,000 tonnes.
This long-standing fondness for the precious metal has made gold a reliable borrowing instrument in India. To increase the appeal of gold loans, many well-known and reputable lenders have begun to offer services to apply loan online and for online payment.
In India, the organized gold loan sector is worth Rs. 4.61 lakh crore, and it’s only expected to increase at a 15% annual pace.
So, what keeps this gold loan ecosystem humming? Let’s peel back the layers of a gold loan to have a better understanding of how it works.
What exactly is a gold loan, and how does one apply for one?
A gold loan is a line of credit given to a retail borrower by a lender, usually a bank or a non-bank financial institution, who uses the borrower’s gold as security. This gold can be in the shape of gold coins, jewelry, biscuits, or anything else. The precious metal is deposited with the institution in exchange for a loan that ranges from 60% to 75% of the market value of the gold deposited as collateral.
Several criteria are taken into account when determining the value of a loan secured against gold:
- Current gold market price
- Borrower’s creditworthiness
- Weight of Gold
- Weight of the stones and other metals in the jewelry
The fact that gold has a stable market position and is less volatile than other investments makes the process of applying for and receiving a gold loan very straightforward. In terms of the application process, there are two options: an online application and an offline application for a gold loan.
When you apply online, the NBFC receives your essential information like your address and phone number, and you are directed to the nearest branch, which speeds up the procedure. You simply need to visit the bank to hand over the gold and other necessities.
A borrower must have a valid ID and the gold they desire to deposit when applying for an offline loan. There is no requirement for a guarantor or prior gold certificates. The NBFC determines the gold value on the spot before extending a loan and issuing a deposit certificate.
What factors go into determining the interest rate on gold loans?
The loan length and principal amount are two factors that influence the interest rate on a gold loan. The borrower’s creditworthiness has no bearing on the interest rate.
The interest rate varies depending on the gold loan scheme that has been requested. Business borrowers, first-time borrowers, borrowers for personal purposes, and even women borrowers have their own schemes.
EMI CALCULATOR
Almost all banks and non-bank financial institutions (NBFCs) that offer gold loans include a useful gold loan EMI calculator on their websites.
To find out the expected monthly installment for a specific loan amount under any scheme, simply enter the factors, such as loan value and duration, to get monthly installment values. Simply deduct the principal borrowed from all of the installments to arrive at the total payable interest you must pay.
Depending on the nature of the loan, most gold loan lenders charge an interest rate of 12 percent to 24 percent per annum. IFL Housing Finance is an NBFC providing best gold loan in India, capable of assisting you in getting the best home loans. IFL gold loan interest rates start from mere 0.89% per month and are comparable or better than many of the market’s leading lenders.
Final Thoughts
In India, gold loans have always been a huge success, and with advancements in the infrastructure, they’re slowly but steadily making their way into rural India as a reliable financial instrument. The Indian gold loan market will continue to lead short- and long-term lending requirements of retail borrowers in India as long as the yellow metal remains a permanent fixture in home lockers.Contact us for the best gold loan policies, services and schemes for your desired amount.