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Gold Loan (Loan against Gold)

Gold loans are an easy solution to fund personal or business requirements. Money from a gold loan can be used to meet expenses related to education, wedding, business expansion or any other similar needs. With minimal documentation, such loans are a go-to option for many to fulfil different financial needs.

What is Gold Loan?

Gold loan is a secured loan that is sanctioned by banks and other lending institutions, where they accept gold ornaments or coins of a customer as pledge. The amount that gets extended to the customer is usually a percentage of the gold’s value. Generally, up to 60% of the gold’s value is offered as loan after valuation. The amount that gets disbursed can be in the form of cash, demand draft (DD) or sometimes, even an account transfer. Gold loans are offered for short to medium term duration, and the entire process is comparatively faster than personal loans.

Why Choose Gold Loan?

Taking a loan by placing gold as a collateral provides one with instant funds for meeting immediate expenses, like a quick vacation, medical emergency, bike or car purchase, etc. Below are some of the main advantages of taking gold loan from banks and other financial institutions:

  • Quick processing and disbursal: Once an individual has submitted gold to a financial institution, the loan amount shall be disbursed to the borrower via the mode as agreed upon. The gold will be kept with the lending institution as collateral until the entire loan amount is paid back. The lender will appoint experts to conduct value determination of gold on the spot, so that the processing and disbursal process is quick, thus helping save a lot of time.

  • Lower interest rates: The interest rate charged for a loan against gold is low when compared with unsecured loans. Since the bank keeps the borrower’s gold as collateral, it does not have to worry about recovering the amount, should the individual default on loan repayment. Some banks offer rates on gold loan for as low as 10.5%, while interest rates on personal loans are higher.

  • Gold remains safe and secure: Banks and other financial institutions offer triple layered security for gold ornaments and coins, should one submit them as collateral. They will be kept securely in a bank vault for the entire period that it is pledged, and shall be returned to the individual once he or she has repaid the loan amount. The secure infrastructure at the bank’s strong-room coupled with high-level CCTV surveillance give an edge to the safety provided by bank lockers over home safes.

  • Loan amount can be used for any purpose: The bank does not restrict the borrower on how he or she wishes to utilize the borrowed money. Individuals can take it for investment purposes or meet expenses related to medical emergency, education, business, marriage etc. One can also use the borrowed amount to finance essential purchases, redesign home decor and undertake repairs, among other things, provided that the purpose is not illegal.

  • Basic Documentation: In case of a personal loan, the lender will insist on knowing the applicant’s CIBIL score, annual income, etc. These details are necessary as they help the lender know the risk it is taking on by extending an unsecured loan (personal loan) to the applicant. In case of a gold loan, all that an individual needs to do is submit a few basic documents like ID proof and address proof. Since risk on the part of the lender is low (given that it is a secured loan), the requirements pertaining to lending are few and simple.

  • Helps meet short-term financial needs/goals: The loan repayment tenure begins from 6 months and can go up to 2 years. This allows borrowers to close the loan sooner than most of the other loans. Gold loans are therefore, a suitable option for those looking to fulfil any short-term financial needs and goals.

  • Simple eligibility criteria: Anyone who is above the age of 18 years is eligible to apply for a gold loan. For some of the other types of loans, lenders require that applicants be at least 21 years. The approval of gold loan application does not depend on the CIBIL score or repayment history, rather on the value of the gold ornaments that the individual plans to pledge. There is no restriction with regards to the profession of the applicant - homemakers, salaried individuals, businesspersons etc. can apply for gold loan, as long as they have good repayment capacity.

  • Flexible repayment options: While the repayment structure will differ depending on the lending institution, some lenders allow borrowers to repay the principal amount at the end of the tenure. Under this repayment route, the individual will have to pay the interest amount during the loan tenure and the principal amount when the loan tenure ends.

  • Special gold loan schemes: The government has introduced a number of special gold loan schemes for individuals in the lower to middle income category, women, agriculturists, etc. One can get in touch with the financial institution from whom the loan has been availed to enquire about any special scheme for gold loan that an individual may be eligible for. Loan against gold is generally offered at discounted rate.

Gold Loan Features and Benefits

Following are some of the features and benefits of availing a gold loan:

  • Collateral will be held safety and securely
  • Simple documentation and fast processing
  • Loan disbursed in matter of a few minutes by some lending institutions
  • Low interest rate payable
  • Quick access to funds
  • Loan renewal facility provided by some lenders
  • Foreclosure of loan (this is sometimes allowed without any extra charges)

Documents required for Gold Loan

Following are the documents required to avail a gold loan:

  • Passport size photo
  • ID Proof (driving license / passport copy / voter ID card / Aadhaar card / pan card / form 60/61 /ration card)
  • Address Proof (driving license / ration card / Aadhaar Card / passport copy / voter ID card / registered lease agreement)
  • Other documents (as specified by the lender)

Gold Loan Interest Rates

Gold Loan ProviderInterest RateProcessing Fee
HDFC Gold Loan10.05% to 15.51%1.5% + GST
ICICI Bank Gold Loan10.00% to 17.45%1.0% of loan amount
Muthoot Gold Loan12% and up0.25% to 1% of loan amount
SBI Gold Loan1.25% above the MCLR-1yr0.50% of the Loan amount + applicable GST, minimum Rs.500/-+ applicable GST
Manappuram Gold Loan14% and upWill differ on a case by case basis
Axis Bank Gold Loan14.75% - 17.25%1% plus GST as applicable

Top Gold Loan Providers in India

Here is a quick look at the top gold loan providers in the country:

HDFC Gold Loan

Features and Benefits of HDFC Gold Loan :

  • Minimal documentation
  • Instant funds
  • Low interest rates
  • Collateral held securely
  • Disbursal in 45 Minutes
  • Flexible rate of interest
  • Loan amount from Rs. 50,000 onwards
  • Quick and efficient servicing
  • Complete transparency

Following documents are required to avail HDFC Gold Loan:

  • Passport or
  • Diving License or
  • Voter's ID Card or
  • Aadhaar Card issued by UIDAI or
  • PAN Card or Form 60

ICICI Bank Gold Loan

Features and Benefits of ICICI Bank Gold Loan :

  • Attractive interest rate
  • Higher rate per gram
  • Complete safety of your jewellery
  • Simple documentation

Following documents are required to avail ICICI Bank Gold Loan

  • Two passport size photos
  • ID Proof - driving license, voter ID card, Aadhaar card, PAN card, form 60/61, passport copy or ration card
  • Address Proof - driving license, voter ID card, ration card, Aadhaar card, passport copy or registered lease agreement with utility bills not older than 3 months in the landlord’s name
  • Proof of land holding for agriculture loan of over Rs. 1 lakh

Muthoot Gold Loan

Features and Benefits of Muthoot Gold Loan :

  • Quick loan disbursal
  • In-house gold evaluation
  • Quality customer service with short response time
  • Minimum loan amount of Rs. 1,500 with no maximum limit
  • Pre-payment option-without any penalty
  • Minimal documentation
  • Safe custody for gold ornaments

Following documents are required to avail Muthoot Gold Loan :

  • Identity Proof: Passport, PAN, driving license, voter ID card, ration card, Aadhaar card or any other ID card issued by a government authority, PSU or nationalized bank, containing the applicant's photograph.

  • Address proof: If the ID proof document contains the borrower's address, then no separate address proof is required. In other cases, the following documents can be used to serve as address proof: Ration card, latest electricity or landline telephone bills, bank passbook, Aadhaar Card or any other documents issued by a government authority, PSU or nationalized bank, containing the applicant's address.

SBI Gold Loan

Features and Benefits of SBI Gold Loan

  • Minimum loan amount is Rs. 20,000, while maximum is Rs. 20 lakhs
  • Low interest rate
  • Minimum paperwork
  • Repayment period (Maximum):
    • Gold Loan - 36 months
    • Liquid Gold Loan - 36 months
    • Bullet Repayment Gold Loan - 12 months

Following documents are required to avail SBI Gold Loan:

  • Application for Gold Loan with two copies of photos
  • ID and address proof
  • Witness letter in case of illiterate borrowers

Manappuram Gold Loan

Features and Benefits of Manappuram Gold Loan :

  • Loans up to Rs. 1.5 crore
  • Different schemes for different needs
  • No time-consuming formalities involved
  • Interest payable only for the exact period of loan

Following documents are required to avail Manappuram Gold Loan :

  • One ID proof document - PAN card, voter ID card, ration card, driving licence, passport etc.
  • One residential proof

Axis Bank Gold Loan

Features and Benefits of Axis Bank Gold Loan :

  • Quick disbursement
  • Gold kept safely
  • No foreclosure charges
  • Minimum loan amount Rs. 25,001
  • Tenure ranges from 6 to 36 months

Following documents are required to avail Axis Bank Gold Loan :

  • Signed application form
  • ID proof
  • Address proof
  • 2 passport size photos
  • Signature proof
  • PAN Card / Form 60
  • Age proof
  • Post-disbursement documents (if any)

How to apply for a gold loan?

Generally, if an individual meets the eligibility criteria listed by the lending institution, then he or she can simply head to the nearest branch of the lender and place a request for a gold loan. The lender will require the person to submit a filled-in application form for gold loan, along with ID and address proof documents. Many financial institutions have started providing the option of door-step service for the convenience of the customer.

Frequently Asked Questions

Who can avail a gold loan?

Anybody can place an application for gold loan, be it a homemaker, salaried individual or a businessperson. The minimum age criteria specified by most lending institution is 18 years.

What are the modes to repay gold loan?

You can repay the loan via cash, cheque or DD. Some financial institutions allow borrowers to repay the amount online through the company’s web portal. The repayment modes will vary depending on the lending institution, and hence it is recommended to contact the respective lender for more information on the same.

Do I have to submit any document to get a gold loan?

Yes, you will have to provide your passport size photographs, identity proof and address proof to the lender while applying for a gold loan. Additional documents may be required, depending on the financial institution's terms and conditions.

What is the tenor of gold loans?

Gold loans are short-term loans, with tenure generally going up to 12 months. However, a few lenders extend it for up to 36 or 48 months.

Is it possible to make a part payment of gold loan amount?

Yes, gold loan can be repaid via part payments. For more information, kindly contact the respective lending institution.

Is processing fee applicable for gold loan?

Yes, a processing fee will apply while availing a gold loan. This will vary from lender to lender.

What kind of gold is accepted as collateral for a loan?

Gold jewellery is acceptable by all bank as collateral, however, gold bars are not. Additionally, only specific kinds of gold coins and bars are accepted by banks as collateral.

Can I get a gold loan if I don’t have a decent credit score?

Yes, since gold loan is a form of secured loan, the lender will not emphasize much on the credit score. The approval of gold loan application is not determined by the score or repayment history, rather on the value of the gold ornaments that the individual intends to pledge.

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