Gold Loan

What is a Gold Loan?

A gold loan is a secured loan that can be obtained by keeping a gold article as collateral. The interest rate on gold loans starts from 7.35% to 29% per annum. The loan amount varies from Rs. 1500 to Rs. 5 crores. The repayment period starts from 3 – 48 months. Apply for a gold loan on CreditMantri by picking the lender of your choice from a pool of lenders. We offer a seamless and simple application process.

Key Highlights for Gold loans

1. Secured loans - Gold loans are secured loans that use a gold article as collateral or security. Anybody with a gold article to pledge as security can obtain a gold loan.

2. Interest rates - Gold loan interest rates start from 7.35% and go up to 29% per annum.

3. Loan amount - The gold loan is available from Rs.1500 to Rs.5 crores.

4. Repayment period – There is flexibility to choose the repayment period from 7 days to 240 months.

5. Minimal documentation – Gold loans don’t need a credit score or income statement in most cases. A gold loan is approved based on the value of the gold pledged as security.

6. LTV ratio - The loan-to-value (LTV) ratio for gold loans is decided by the RBI at 75%. What this means is that you can get a loan worth 75% of the value of the gold pledged.

7. Usability – There is no restriction on the usage of gold loans and they can be used for a variety of purposes. This may include vacation expenses, emergency medical expenses, or educational needs.

8. Processing time – Minimal processing time is required for Gold loans as there is minimal documentation required.

9. Types of Fees – The types of fees associated with a gold loan are processing fees, penalty fees for non-payment of interest, late payment charges, etc.

10. Rebates – Some lenders might want to offer a rebate of 1%-2% based on the borrowers’ financial discipline. Those who repay their interest regularly might be offered a rebate.

Factors Affecting Gold Loan Interest Rates

For the approval of a gold loan, lenders look at factors that determine the interest rate. The lenders want to make sure their decision to lend is not a risky one.

Following are some of the important factors that determine the gold loan rate –

1. Income Level – Probably, one of the most important factors that a lender will consider while approving a gold loan. Lenders are more comfortable about your repayment capacity if the income level is high and hence might offer a lower interest rate. Lower-level income, however, might attract higher interest rates. It’s safe to say that income level and interest rates are inversely proportional.

2. Gold Market Price – The market prices of gold also determine the interest rates the lenders want to offer. Typically, the loan amount would be around 60-75% of the value of the gold article kept as collateral. If the gold market price is high, the value of the collateral also goes up and hence the lender’s risk goes down. The lender feels more comfortable in extending a low rate of interest. However, in case the gold prices are down, the lender’s risk increases, and the interest rates would go up.

3. Principal Loan Amount – The rate of interest also depends on the amount of the loan or the principal amount. The higher the principal amount is, the lower your interest rate would be. This is because the lender has a higher-value loan gold article pledged as security and hence they are comfortable offering a lower rate of interest.

4. External Benchmark Lending Rates – When the Reserve Bank of India (RBI) changes its policies/rates, the gold loan interest rates also change. The gold loan interest rates are believed to be linked to an external lending rate which could be the repo rate or the 10-year government bond rate. They have an impact on the gold loan interest rate also and are directly proportional.

5. Credit Score – Credit score is one of the most important factors looked at by lenders while approving a gold loan. The higher the score is, the higher the chances of the borrower getting an attractive interest rate. The lower your credit score is, the higher the interest rate will be most likely. It is best to always research all the options available for you and then proceed with the application for the loan.

What are the disadvantages of a gold loan?

Emotional issue: Gold as an asset has emotional value in India since it is largely in the form of family jewellery. Providing gold as a collateral means that you run the risk of losing your family jewelry in case you are unable to repay the loan. This can cause undue mental and emotional pressure not just on the borrower but the entire family.

Quality of lender: There are several NBFCs in the country who offer attractive terms for these loans. However, some of them could be poorly run and could possibly shut down without notice. It is very important to study the various lenders and choose one that has a good reputation. In addition to these NBFCs, several nationalized and private banks offer these loans.

Key Gold Loan Providers On CreditMantri

Rupeek Gold Loans

Key Highlights of Rupeek Gold Loans

2. Speedy approvals and disbursals

3. Loans available for bad credit scores also

4. Flexibility of repayment

5. No Pre-closure charges

6. Safe storage of gold kept as collateral

7. Three payment methods

a) Interest payment – In this method, principal repayment can be delayed but interest repayment has to be done every month

b) Bullet Repayment – In this method, the entire interest and principal repayment are done at the end of the loan tenure. No monthly payment needed

c) Part Payment – In this method, you can pay via EMIs.

Indiagold Gold Loans

Key Highlights of Indiagold Gold Loans

2. Doorstep loan service

3. Minimal Documentation

4. No processing fee

5. Loan balance transfer facility available

6. Top-up loan available

7. Gold stored safely in vaults

Ruptok Gold Loans

Key Highlights of Ruptok Gold Loans

2. Doorstep loan service

3. Minimal Documentation

4. Payment method

a) Regular Rebate – In this method, monthly payment is made towards loan repayment

b) No tension – In this method, both principal and interest are paid after one year.

Key Gold Loan Providers in India

Charges and Fees on a Gold Loan by Top Lenders

Eligibility Criteria for a Gold loan

1. Age – 21 to 70 years

2. Employment Status – Self-employed, Salaried, Farmers, Business people, etc.

Documentation Needed to Apply for a Gold Loan

2. Address proof – Passport, Aadhaar card, Voter ID card, Driving License, Letter issued by National Population Register.

Gold Loan EMI Calculator

The EMI for a gold loan is dependent on the following factors –

1. Tenure of the loan

2. Interest rate

3. Principal amount

You can check the EMI on your gold loan by using the CreditMantri Gold Loan EMI Calculator. Click here to check.

The application process for a gold loan

Application for a gold loan via CreditMantri

1. Choose the lender of your choice

2. Click on “Check Eligibility” to apply for the loan. If you want to read about the features of the loan in detail, click “Know More” below the “Check Eligibility” option.

3. Fill in details like email ID, Mobile number, Residence city, Employment type, Residence pin code, and info about any loans that you may have

4. Tick all checkboxes for agreement terms.

5. Click on “Submit”

6. Enter the OTP received on your registered mobile number.

7. Proceed with the rest of the application and your application will be processed in no time.

Applying for a gold loan offline

2. Fill in the application form.

3. Once the application is approved, the lender will get back to you with the details.

Applying for a gold loan online

2. Most lenders will have a button called “Apply Now”

3. Make sure you have digital copies of all the required documents

4. Fill in all the required details and submit the form

5. The lender should get back to you in a few days

Gold Loan and its impact on the Credit Score

Applying for a gold loan itself doesn’t harm your credit score. But there are a few things to be kept in mind with a gold loan.

1. Gold Loan Application – Gold loan applications do not necessarily bring your credit score down. But, too many inquiries in a short period of time may indicate that you need a lot of funds. Lenders may perceive the situation as your inability to pay back the gold loan. Hence, avoid making too many inquiries too soon.

2. Gold Loan EMI Payments - Make sure you pay your gold loan EMIs on time. Failure to pay the EMIs before the due date will definitely lower your credit score. Here is what you can do to avoid this –

a) Make regular payments – Paying your EMIs on time will ensure your credit score will slowly go up. It shows great financial discipline on your behalf.

b) Avoid Loan Default – Loan default happens when you are not able to pay the loan back within the stipulated tenure. This delay is reported by the lender to the credit bureaus who will in turn perceive it as bad credit. If you do not pay the loan back for 90 consecutive days, you might get an NPA (non-performing asset) label on your credit report. This will lower your credit score further and also hamper your chances of getting loans in the future.

Things to Remember While Applying for a Gold Loan

What should you do?

1. Check the purity of your gold article – Lenders usually take gold that is 18 carats and more in purity. Check the purity of your gold article beforehand to avoid fraud and disappointment later.

2. Look for a trusted lender – Since a gold loan is a secured loan and requires a gold article to be pledged, the lender you go to must be a trustworthy person. You would want this to be a fair deal and not incur losses because of a fraudulent lender.

3. Check all lender options available – All lenders will have a different assessment of the applicant’s profile. Their offer would be different in terms of interest rates, repayment tenure, etc. Look for the one that suits your requirements the best.

What should you not do?

1. Take a gold loan only when needed – Gold loans are easy to get as you only need a gold article as a security. However, do think if you really need the loan as you will have to pay interest on the amount borrowed.

2. Do not take a loan for addictive purposes – Some people pledge their gold articles to borrow money for betting, gambling, etc. They will lose a lot of money because these activities are not predictive in nature. You not only lose your gold article but also will have to repay the debt borrowed as a gold loan.

3. Estimate the amount of loan you will get – The limit set by RBI for the loan-to-value (LTV) ratio is 75% of the gold article pledged. Before you opt for a gold loan, you must calculate if this is going to be a sufficient/over-sufficient amount for you.