The gold loan enables the borrower to borrow a certain amount of money as a loan from the bank against the security deposit of his gold possession. It is the most reliable form of secured loan and easily available as well. If you need urgent funds, then the gold loan is the best option as the loan amount gets disbursed within a day.
In India, people are mostly skeptical of using gold as a means to procure finance and consider it as a last resort option. However, gold loan can be an extremely useful source of procuring funds, especially in cases where you do not have any previous credit history or the need for funds is very urgent.
Security of gold is another concern most people have when it comes to a gold loan. But you can rest assured that the gold you submit as collateral is kept in tight security as per the guidelines of RBI. There is no threat to the security of your gold, and it will be returned as you submitted them upon the timely repayment of your loan.
In order to obtain a gold loan, one must adhere to the minimum eligibility criteria.
Unlike other loans, loan against the gold raises a huge amount as loan limit, and the rate of interest is also less than an alternative loan.
Although it is very easy to get a loan against gold, certain criteria need to be fulfilled in order to obtain it.
The Criteria Are as Follows:-
- Basic criteria:- The most basic criteria to obtain a gold loan is that you have gold. Gold in the form of jewelry, ornaments are easily accepted by lenders. Some lenders also accept gold biscuits. The gold should be between 18-22 carat. No other metals like platinum or diamonds are considered in ascertaining the value of gold and the loan amount.
- Age criteria:- The age of the applicant must be not less than 21 years old. The age is a relevant factor for the loan application as it works as an assurance of the applicant to be mature and sound by the mind, and he has knowingly applied for the loan for some genuine purpose. The maximum age for the borrower of gold loan is 75 years.
- Borrowing limit criteria:- Loan against gold can be availed up to a certain limit of amount. The borrowing limit shall not exceed the borrowing criteria in such cases; the loan application may otherwise turn down. So one must readily understand the loan limit available before opting for it. The borrowing limit of the loan varies from 60-75% of the gold valuation.
- Tenure criteria:- This implies the course of the duration of borrowing, after which the borrower needs to pay back his loan. This time duration is generally specified within the span of 1.5 to 2.5 years. The applicant cannot apply for a loan exceeding the specific time duration.
- Documentation criteria:-In order to seek approval for the loan, one must possess legal documentation. Documents are the relevant criteria to apply for a loan. The relevance of documents is to serve the purpose of knowing the customer and his background as well as to analyze his repayment capability.
- Purpose criteria:- This criterion implies the need for opting loan to serve a particular purpose. Banks and other financial sectors before raising loans specify the details of the borrower. The bank lending loan against gold must be very particular about the reason and purpose to be fulfilled by the loan amount.
The loan can be approved to serve the following needs:-
- Education purpose
- Expansion of business
- Agricultural purpose
- Down Payment on purchase of any property or asset
- Medical emergency
- Starting a business
- Debt reconciliation
Although, specifying the purpose for which you are availing the gold loan is not mandatory. The end use of the borrowed funds is entirely in your hands.
After meeting the above criteria, the borrower is entitled to get a loan against gold. Though the security against the loan is strong enough to receive the due amount, still the above criteria are relevant to get it approved. A great advantage of availing gold loan is that it does not require any credit score. So, even if you are new to availing credit, you can still get gold loan.
Also, the borrower of the gold loan need not even be an earning person as no income proof is required to avail gold loan. This means that even homemakers can avail of the gold loan in times of need.
The gold loan also comes with a flexible repayment option. You can choose to pay the interest amount until the end of the tenure repay the principal amount at the end.
The applicant should have a comprehensive understanding of all these so that his application is accepted, and the loan is sanctioned without any hassle.