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IMPORTANT THINGS TO KNOW ABOUT GOLD LOANS

Posted on Thursday May 23rd, 2019

How Do Loans Work In Banks?
A bank loan is taken when people want to borrow money when they need to purchase something big or cover unexpected expenses. The bank usually gives people credits depending on their ability to pay back. These can be secured, attached to collateral like gold, jewelry, car, or it can be unsecured. The interest may be determined through the person’s credit score, and the monthly payments go to the bank. The bank gets money from four sources, capital from shareholders, from multilateral organizations like IFC and individuals. Deposits and retail deposits from companies and individuals and retained profits which form cash formation.

How Do They Help?
Loans can be beneficial when in times of need when people have lesser income or need to purchase something that is out of their budget. Gold Loans can come handy; the borrower pledges his gold for some amount of money. Instead of taking vast amounts of money and borrowing it from your friend or any other person, banks provide this secure facility, with a low-interest rate, which can be paid back quickly. The bank keeps these assets as collateral, and then uses it as principle and the interest to be paid to the bank when the person is not able to pay back.

How To Apply For A Loan Against Gold?
To apply, you need to submit few identity proofs, which is a must for any application, such as Aadhaar card, Driver’s license, PAN card or passport, if not, you will have to fill form 60 and submit it. They also need signature proof and address proof, for this, you need to submit passport copy, driver’s license or any other document necessary that fits the category, for address proof, you need to provide, ration card, telephone bill etc. besides, a passport size photograph will also be necessary. Some banks and lenders ask for income proof, to be secure so that the person they are lending to has the capacity to pay back the money within the interest.

Who Is Eligible And What Are The Interest Rates?
Anyone can be eligible who owns jewelry in gold and is willing to keep it as collateral that can be professionals, farmers, housewives etc. It is always crucial to compare and find out all the interest rates available before applying. As this is a Secured Loan the interest rates will be a little lower compared to other personal and unsecured ones. Sometimes, Non-banking financial companies or NBFCs can charge higher interest compared to banks. Since people with lower income and financial difficulties cannot repay the principle within so much interest, it is advisable to look at all interest rates and then apply.

What Is Tenure Or Duration?
Usually, the tenure or the duration can be up to 3-12 months, sometimes, there may be longer tenures, where the banks or the lenders allow people to extend their period. However it is a must that the money needs to be paid back or the lenders can liquidate and auction to recover the amount.