A Gold loan is a loan where the customer can easily get funds by pledging the gold ornament at any bank, financial institution or NBFC (Non-Banking Financial Companies). Customers get the flexibility to use the funds they've borrowed from the gold loan freely as banks don't monitor the end usage of the fund. So customers can use it for various purposes at the same time. So people are getting encouraged to take gold loans by pledging the gold ornaments to get funds against it. However, there's a lot in it that the eye can see. So let's learn more about the reasons why gold loan demand is scaling up. Now that you know what a gold loan is, you probably must be figuring out why it is suddenly in demand. So the answer to this question is in below-mentioned points:-
The easiest option to get funds:Gold loan is one of the most convenient options for individuals. You can easily get funds by pledging your gold ornament as collateral. It's not a very big process; the entire loan process is very easy, quick and effortless.
Banks don't monitor the usage of the funds. So customers can freely use the funds they've borrowed from the gold loan for various purposes like wedding, vacation planning, debt consolidation, house renovation, medical expenses, child's education fee, miscellaneous expenses, etc. There's no constraint on the usage of funds. However, you can't use it for any illegal practices.
The standard LTV rate is 75% to 85%. It is the percentage amount of gold rate you'll get from the Gold Loan Per Gram. But during this pandemic, the LTV rate has increased to 90%. So now you'll get more money for your gold ornament. For example:- If your gold jewellery is INR 1,00,000 and the past LTV rate was 75%, so the loan amount that you'll get is INR 75,000, but now you can get up to INR 90,000 (90% of INR 1,00,00). So you can get more money from pledging your gold ornament.
Repayment:- Customers have the flexibility to choose a repayment structure and tenure according to their budget, income, expenses and repayment capacity. So it's important first to calculate your income and budget and then check your repayment capacity. You can even use some online tools like a gold loan calculator or gold loan interest rate calculator.
Provision for loan amount:- During this pandemic, a lot of banks have removed the restriction regarding the loan amount. So an individual can borrow as little as INR 3000 for a gold loan. And because of this reason, a lot of individuals are getting encouraged to pledge their small gold ornaments to get funds. This reason is also making it a better option than a credit card.
Documentation:- The entire documentation process of the gold loan is very simple and quick. You don't have to submit bundles of paperwork to get your loan application approved. Banks will only ask you for basic KYC documents like Aadhar card, Pan card, Voter ID card, Passport, Electricity bill, Water bill and other utility bills.
Income proof:- Unlike other loans, you don't have to submit any income or employment proof to get your loan application approved. This option makes a gold loan an ideal loan for unemployed individuals.
Credit Score:- As a gold loan is a secured loan, you don't necessarily have to maintain a decent credit score to get funds through this loan. You can also use this loan as an opportunity to increase your credit score by repaying the instalments on time.
Procedure to apply for a Gold loan:-
You can apply for Gold Loan In SBI using both online and offline facilities. You'll have to fill the application form and attach some essential KYC documents for verification purposes. Bank will then value your gold ornament and decide the loan amount that has to be sanctioned. After you've consented to all the terms and conditions regarding the repayment structure and interest rate, the bank will instantly disburse the loan amount to the borrower's bank account.
Also read this: A Guide On How To Take A Gold Loan