Gold Loan - Know about Eligibility, Interest Rates and Tenure

There's no denying that gold has always been seen as an important financial asset. Gold is seen as an investment option since most people in India have gold in their homes in the form of gold coins or jewellery to assist them during financial exigencies. Gold is seen as a precious metal that retains its value over time even if there are price fluctuations in the market. However, apart from being an attractive investment option, gold can also help an individual get a loan when they need them the most.

Table of Content:

• What is Gold Loan
• How Does Gold Loan Work?
• Gold Loan Eligibility
• Important Considerations for Gold Loan Eligibility in India
• Interest Rates For Gold Loan
• Tenure Of The Gold Loan
• In Conclusion

What is Gold Loan

Gold loans are one of the best options to meet your financial needs and fulfil your needs for urgent capital requirements. Loans are of two types, namely secured loans and unsecured loans. Unsecured loans such as personal loans are given to an individual without any collateral. Whereas, secured loans like gold loans are given to an individual against collateral, which is gold. As the lender has security against the gold loan, it is the most preferred instrument over an unsecured loan.

How Does Gold Loan Work?

A gold loan is a loan where the borrower pledges the gold as collateral to a lender to borrow money. One can apply for a gold loan online as well, where the borrower can approach a financial institution for a gold loan, and the lender checks the purity of the metal that is being considered as collateral along with determining the value of the jewellery.

After this, KYC norms as stated by the Reserve Bank of India are performed by the lender to understand the borrower's complete details like identity, credit history, the necessity of applying for the loan etc. which are crucial details for granting the gold loan. After the purity is checked and KYC norms are fulfilled, the gold loan terms like tenure, interest rate etc. are agreed upon by both the lender and the borrower. Upon agreement, the loan is sanctioned to the borrower and the final amount is disbursed to the respective bank account.

GOLD LOAN ELIGIBILITY

To be eligible for a gold loan, an individual has to fall under certain criteria that the lender specifies. Gold loans can be availed by any individual who is salaried, businessman, farmer or trader. The age limit of the borrower should be between 21 and 60 years. The borrower also need not have a good credit score to avail a gold loan, provided that the borrower needs to have enough gold to pledge for the gold loan. Some financial institutions also offer a gold loan eligibility calculator for the ease of borrowers that enables them to determine the amount of gold they are eligible for based on the amount of gold they have and the purity of gold.

Important Considerations for Gold Loan Eligibility in India

There are a few factors that determine an individual's eligibility for gold loan loans, such as:

• Gold Ownership: The first thing you need to avail a gold loan is, ornaments of certain purity and weight. This is also the main factor that is taken into consideration while determining the loan amount.
• Age: Any individual who is above the age of 18 years can pledge gold ornaments and avail a loan against them.
• Identity and Address: While applying for a gold loan, you need to provide valid proofs of your identity and address. These documents are required for verification purposes and can include Aadhaar card, voter ID, passports, driver's license, etc.
• Required Loan Amount: In gold loans, the amount one can obtain solely depends on the weight and purity of the ornaments that are being pledged. While sanctioning a loan, the lending institution performs a valuation of those ornaments to check the eligibility.
• Repayment Capacity: Since gold loans secured loans, you don't need a credit history or a high credit score. But all lending institutions require documents like bank statements and income tax returns from previous years to check your repayment capacity.

INTEREST RATES FOR GOLD LOAN

Any individual before applying for a gold loan looks very closely at the interest rates that they will get from the lender. The interest rate charged on the gold loan directly impacts the repayment amount, as it consists of both principal and interest amount. Interest rate is the interest charged on the gold loan borrowed amount. A higher rate of interest automatically translates into higher repayment and a lower rate of interest translates into lower repayment. The interest rate on the gold loan completely depends on the kind and purity of the gold that the borrower pledge. When compared to unsecured loans, since gold loans are secured loans, the interest rate charged on them is low, since the borrower needs to provide collateral to avail of a gold loan.

That being said, the interest rate charged on gold loans varies from lender to lender. It is in your best interest to compare the interest rates charged by different lenders to make an informed decision. In addition to the interest rate, many lenders may levy other charges like processing fees, documentation fees, payment default fees, appraiser fees, loan defaulter fees etc. These costs can cumulatively increase the total cost of the loan amount. Hence, you must check all such charges in advance because it directly affects the EMI of the loan amount. Thus, look for a lower gold loan interest rate that can reduce your repayment costs to a great extent.

Suggested Read: Finding The Best Gold Loan Interest Rates In 2024

TENURE OF THE GOLD LOAN

Repayment of a gold loan is a crucial aspect as it helps in shaping your credit score. Gold loans are short-term loans with repayment options ranging from seven days to three years. The maximum tenure of a gold loan differs from lender to lender. You must make sure to take your repayment ability into consideration and choose a gold loan tenure that suits your preferences and pay back the loan amount within the period. A longer tenure means that one has to pay a higher rate of interest and vice versa.

Suggested Read: Choosing The Right Tenure For Your Gold Loan

IN CONCLUSION

Opting for a gold loan has become much easier than the conventional way as borrowers can now avail a gold loan from the comfort of their home and estimate the EMI of the gold loan through online tools like gold loan calculator. Muthoot Finance is India's number one trusted NBFC that offers its customers a wide range of gold loans with different interest rates to different borrowers. Gold loans by Muthoot Finance are offered at a per gram basis which is very convenient to avail as it offers interest rates that are highly competitive.

For the ease of consumers, Muthoot Finance also offers an online tool to navigate the process of availing a gold loan. One can simply go to the Muthoot Finance website and use the gold loan calculator to know about their eligibility and EMI options without any hassle. To conclude, when it comes to gold loans, Muthoot Finance offers instant gold loans to apply online whenever and wherever and helps the consumers to make an informed decision as *India's No. 1 Most Trusted Financial Services brand.

*Power of Trust, TRA's Brand Trust Report for 6 years since 2016