Several banks have recently launched new gold loan schemes for those who may need funds for emergency.
Gold in India is considered as a trustworthy ally in case of any financial crisis. Consumers turn to their gold ornaments/metals lying idle in the lockers to get immediate fund requirements at times of financial woes. One option that has lately garnered interest is gold loan.
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Several banks have recently launched new gold loan schemes for those who may need funds for emergency. As per experts, borrowers can get the credit transferred almost instantly in case of gold loans.
How to avail gold loans?
Gold loan can be availed online through any bank's website and mobile apps.
"There are various online portals where users can check the gold loan eligibility and compare gold loan schemes offered by various institutes,” says Vaibhav Saraf, director, Aisshpra Gems and Jewels.
After applying for gold loan, the amount is instantly credited to the borrower bank accounts based on the current value of gold jewellery pledged with the lender.
According to V P Nandakumar, managing director and chief executive officer, Manappuram Finance Limited, the customer is, however, required to make a one-time visit to the branch and get gold ornaments appraised for purity and value.
"On handing over the custody, the company issues a receipt (pawn ticket) listing out full details about the pledged ornaments. After handover of the gold, lender is responsible for its safe and secure storage, and it is insured,” he added.
How does a gold loan work?
A credit limit (just like a bank overdraft account) up to 75 per cent of the market value of the pledged gold ornaments can be sanctioned as gold loan, experts say. This amount can be withdrawn by the customer using a mobile app or other internet enabled devices.
No EMI payments are prescribed as gold loan allows bullet repayments of the principal. Customers are required to service the monthly interest accruing during the tenure of the loan
“On repayment of the loan, the gold can continue to remain with the lender for future loans or withdrawn by full settlement of dues in the account,” explains Nandakumar.
On maturity, users have the option to repay the principal and close the account or extend the tenure by re-pledging the jewellery.
There is no limit on how many times customers can repledge their gold, which means the loan can be rolled over for as long as they want.
“Customers have the flexibility to avail the loan for the period they want. All they have to ensure is that interest in the account is serviced periodically,” adds Nandakumar.
Should you avail it?
Experts describe gold loan as an ideal option for short term requirements.
"However, customers should borrow only as much as needed and not over borrow. They should have a repayment plan in mind to ensure they don’t end up defaulting on the mortgage payments and come out of debt as per the repayment timeline decided," suggests Ishu Datwani, founder, ANMOL.
First Published: IST