Gold Loan: Benefits and Features

A gold loan is a type of loan in which gold is hypothecated or mortgaged with a lender till the time the loan is repaid. It is one of the most popular types of loans especially in villages and smaller towns. A gold loan is an excellent option to raise funds especially in case of emergencies.

Features of a gold loan:

1. A gold loan is a secured loan, which means the gold has to be kept with the lender till the time the loan is repaid. Once the loan is repaid, the customer can collect the gold that has been kept with the lender.
2. The lender may accept gold of a certain purity, for example 18 karat, 22 karat, 24 karat. The lender will specify this on their website or in the branches clearly.
3. The lenders usually accept all types of physical gold such as jewellery and biscuits or coins.
4. Gold loans are short term loans with tenures ranging from a few months to 12 or 24 months. The loan tenures will differ from lender to lender.
5. The repayment structure for loans may differ from lender to lender as well. Some lenders will require a monthly installment based system whereas others will take repayment at the end of the loan tenure with only interest payments in between.
6. This loan generally does not require much documentation except for standard KYC documents.
7. The lender generally independently verifies the purity of the gold and the weight.
8. The loan amount is generally 60% to 70% of the market value of the gold.
9. Lenders keep the gold under lock and key till the time the loan is completely repaid.

Benefits of gold loan:
1. A loan against gold has very low or no loan processing fees.
2. Lenders process these loans very quickly. Funds can be disbursed the same day as well.
3. This type of loan can be used to raise funds quickly in case of emergency. It can also be quickly repaid. There are no prepayment or foreclosure charges on such type of loan.
4. Since this is a secured loan, the gold loan interest rate is lower than that for other loans like personal loans.
5. Most lenders transparently display their fees and interest costs up front. There is no need to be scared about hidden costs and fees in loan against gold.
6. No income proofs are required for a loan against gold.

A gold loan is one of the best options to raise quick funds from lenders. A host of banks and non-banking financial companies offer gold loans in the market which make it easy to opt for such a loan.

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