Gold loans, secured against the value of your gold articles, typically provide up to 75% of the gold’s market value. Lenders assess gold quality and borrower credibility before approving the loan. This makes gold loans suitable for individuals with low credit scores, catering to short-term financial needs. The repayment structure involves paying interest first, followed by the principal amount, through easy monthly installments (EMIs).
Gold holds cultural significance in Indian celebrations, adorning brides, grooms, and idols, enhancing the beauty of festivals and weddings. However, during financial uncertainty, parting with this precious metal can be emotionally challenging due to its cultural and sentimental value.
Fortunately, you don’t have to sell your gold in times of financial need. Gold jewelry loans offer a solution, allowing you to unlock its value and access funds while retaining ownership of your cherished asset. Obtaining a gold loan from a bank or Non-Banking Financial Company (NBFC) is a straightforward process.
Apply now for instant and flexible gold loans, starting at interest rates of 11.5% p.a., to meet your financial needs.
But how does a gold loan work? Is it a viable strategy for urgent monetary needs? Read on as we explore the answers to these questions and shed light on gold loans.
Are Gold Loans Secured or Unsecured?
Gold loans operate similarly to traditional secured loans, with some differences. A gold loan involves receiving a cash amount from a lender after offering your gold as collateral. Once you pledge your gold items, you can retrieve them only after fully repaying the loan. For example, you can avail a jewelry loan by using your gold ornaments as collateral. The loan amount granted depends on market rates and the quality of gold, with most lenders providing up to 75% of the gold’s market value.
How Does a Gold Loan Work?
Here is a detailed description of how you can avail yourself of a gold loan:
Confirmation of the Quality of Your Gold Articles
The first step is a standard quality check by in-house experts to determine the exact quality and market value of your gold articles. If the gold is verified to be between 18-24 karats, the lender will approve the loan easily.
The KYC Process
In this step, the lender verifies your personal details essential for loan approval. Know-Your-Customer (KYC) is used to validate the borrower’s identity, focusing on assessing credit history, the reason for the loan application, and other crucial information about the gold loan applicant.
Loan Request Approval
After determining the value of the submitted gold articles and confirming the borrower’s credibility, if the lender is satisfied, the loan request is approved. Both parties then sign a document detailing the terms and conditions of the gold loan, including the repayment terms. A few hours after the agreement is drafted and signed, the loan amount is credited to the specified bank account of the lender.
Repayment
Various repayment methods are available, with Equated Monthly Instalments (EMIs) being one of the most popular. EMI payments cover a percentage of the principal and interest, providing a structured and manageable approach. allowing early closure of the loan with a small fee of 3% to 6%.
What Are the Repayment Methods for Gold Loans?
Most gold loans offer flexible repayment methods to help you complete your payments quickly. Let’s look at two of the most common repayment methods:
Interest First, Principal Amount Later
This process has two parts:
- You can pay the interest as per the EMI schedule of the lender.
- After you pay off the interest in monthly payments, the principal amount needs to be paid at once when the tenure ends.
This method allows managing monthly cash flow effectively, with smaller and more affordable monthly payments. It also enables better financial planning to accumulate enough to pay back the principal amount in a lump sum.
Equated Monthly Instalments (EMIs)
EMIs are the most popular and standardized method of repaying gold loans. Every monthly EMI payment includes a percentage of the principal and interest, providing a structured and consistent approach. You continue paying fixed EMIs throughout the loan tenure until the loan is fully paid off. To calculate your EMI payments online in seconds, you can use the Gold Loan EMI Calculator from Shriram Finance.
Benefits of a Gold Loan
Here are some reasons why gold loans are preferred over other loan options:
- Bad credit score doesn’t hinder loan approval, as gold serves as valuable collateral.
- Timely repayment boosts credit score, leading to lower interest rates for future loans.
- Ideal for short-term needs, with attractive rates.
- Access immediate funds using liquid gold, avoiding depletion of savings.
- Protect your gold articles by mortgaging them for loans instead of selling them.
Wrapping Up
Gold has proven to be a fantastic asset, acting as an investment option that helps deal with urgent financial needs. It also offers a great way to secure gold loans at competitive interest rates from reliable sources like Shriram Finance.
So, solve your financial worries with a convenient gold loan! Get a quote now to avail yourself of flexible gold loans with effortless repayment options.
Frequently Asked Questions (FAQs)
- What are gold loans?
- A gold loan is the money or loan amount you receive when you pledge your gold assets to a lender.
- How does a gold loan work?
- The process of acquiring a gold loan involves three simple steps: Bring your gold to the lender, who will check its purity and then get an estimate of its value and current market price. Confirm your identity and credit history with a KYC process. They will discuss the loan agreement with you before crediting the amount. You repay the amount to get your asset back.
- What is the process for taking out a gold loan?
- The process always starts with an in-depth look at your gold articles. As you await the results, you must undergo a KYC process to confirm your identity and other relevant information. After these steps, the loan provider decides if you can get a gold loan. If the process is successful, you get the loan.
- Is a gold loan good or bad?
- A gold loan is a good option to take advantage of the high liquidity of your gold articles without selling them. It enables you to address upcoming expenses comfortably.
- What are the interest rates on gold loans?
- Gold loans are secured loans and the interest rate differs from lender to lender. However, Shriram Finance offers gold loans starting at 11.5% p.a.*.
Note: This article is presented for both informational and entertainment purposes and does not constitute financial advice. Readers are encouraged to appreciate the art but consult with financial professionals for personalized guidance.
