Have you got gold jewellery sitting in the locker? Perhaps it’s an old wedding set or some inherited ornaments that have languished in a safe deposit box for decades.
Though they have sentimental value for many, they hold great financial potential. When you need funds on an urgent basis or in case to meet temporary expenses, a gold loan is your best option.
Let us discuss how a gold loan works, how these are so helpful, and some of the things that you would like to know before coming to get one.
What Is a Gold Loan?
A gold loan is a secured loan under which you borrow and lend gold, usually in the form of jewellery, in exchange for cash. Both banks and non-banking financial companies (NBFCs) offer gold loans.
You don’t have to sell your gold. You’re just using its value to meet a short-term need, be it education fees, business needs, a medical emergency, or home repairs.
Why Choose a Gold Loan?
Here’s what makes gold loans stand out compared to other types of loans:
Quick Processing
Need funds fast? A gold loan gets approved almost instantly, usually within 4 hours or even less. There’s no long waiting period and no heavy documentation. Just walk into a branch with your gold and ID proof and walk out with cash or a bank transfer.
Lower Interest Rates
One of the biggest advantages is the gold loan interest rates. Since it’s a secured loan, the interest is much lower than a personal loan or credit card debt. Rates generally start from 9% and can go up to 24% p.a., depending on the lender, loan amount, and repayment terms.
EMIs For Loan Repayment
Generally, you need to repay the loan amount in EMIs. The EMI amount includes the principal and interest amount. Moreover, the EMI amount is decided by the loan amount and tenure. You may discuss other repayment options like bullet payments or part-prepayments. It is important to repay the loan on time to avoid penalties or auctioning of the gold.
Loan Tenure and Eligibility
The loan tenure usually ranges from a few months to up to 4 years, depending on your needs and the lender’s policies.
Anyone who owns gold and is over 18 years of age can apply. All you need is your gold (minimum 18 karats), ID proof, address proof, and 2 passport-size photos.
Understanding Gold Loan Interest Rates
Gold loan interest rates are set by the lender and depend on:
- The purity and weight of your gold
- Your repayment history and tenure
- The current market interest trends
Interest rates and terms may vary among banks and NBFCs, so be sure to compare. So, ask the right questions before you apply:
- What is the interest rate per year?
- Are there any processing or renewal fees?
- What if I am behind schedule on a payment?
Having prior knowledge of your gold loan interest rate saves you from any surprises in the future.
Is Your Gold Safe?
Yes. Reputed lenders store your gold in high-security vaults and offer insurance while it is with them. Once you repay the full loan (along with interest), your gold is returned safely and in the same condition.
Make sure you collect a receipt when submitting your gold and read the fine print before signing.
When Should You Consider a Gold Loan?
You can consider a gold loan when:
- You need money urgently
- You want to avoid selling off investments or property
- You don’t qualify for unsecured loans due to poor credit
- You want a loan with lower interest and faster processing
Final Thoughts
Gold loans are no longer a last resort; they’re a smart financial move. They help you get cash when you need it, the interest rate is typically lower than other transactions, and your gold is kept safe and will be returned. With flexible repayments and competitive gold loan interest rates, these are a much more considered decision than using long-term savings or taking a high-interest loan.
So, next time you face a financial crunch or opportunity, remember that your gold already holds the answer.
