According to a recent report, the financial institution’s portfolio for a gold loan increased by 81.6% y-o-y to Rs.60,464 crores in March 2021. The demand for the said credit can be attributed to the current economic scenario and the high cost of living in most Indian cities.
A secured gold loans offer substantial credits against the collateral’s value. As a result, individuals in need of emergency or instant funds can easily access credits by fulfilling minimal eligibility.
Since a loan against gold is beneficial in many ways, understanding its variables will aid in making the best decision.
What makes gold loans a viable financial source?
Every Indian household possesses a certain amount of gold jewellery. Passed down with generation as a financial backup, the value of gold fluctuates with prevalent economic conditions. Recently, RBI has hiked the LTV ratio cap on gold loans for non-agricultural purposes to 90%.
This indicates a lucrative time to avail of loans against gold items as the credit availability will be substantial. Moreover, the stagnant 4% repo rate has made most loan variants cheaper for borrowers.
Hence, individuals looking to finance big-scale spending without affecting disposable income can check the features of gold loans. It is also crucial to be aware of the loan application process beforehand.
How to apply for a gold loan?
With digitalization, making a loan application has become simpler and a matter of minutes. The steps to successfully apply for a gold loan from NBFCs like Bajaj Finserv include:
1: Visit the preferred lending institution’s website.
2: From the ‘Product’ tab, select ‘gold loan’ option.
3: On the redirected page, fill the form with relevant personal and professional details.
4: A representative will contact an applicant for subsequent processing.
Individuals can visit the official branch or call a lending institution to know the details of the application. Ideally, a company representative contacts an applicant for documentation and gold evaluation. After successful verification, the loan amount is disbursed to a borrower’s account.
To streamline the said application, potential borrowers need to fulfill the required eligibility parameters and documentation beforehand.
What are the eligibility criteria for a gold loan?
Following are the eligibility requirements an applicant needs to comply with to avail of a loan against gold:
- An applicant should fall in the age bracket of 21 to 70 years
- Any self-employed/salaried individual, farmer, businessman, or trader are allowed to make an application
- They must possess adequate gold articles
Individuals also need to submit certain documents to authenticate their credibility. The basic requirements include:
- Identity proof, including PAN, Aadhaar, voter ID, driving license, etc
- Address proof
Potential borrowers also need to submit income proof along with documents related to the gold.
Besides simple eligibility and documentation, a gold loan also extends additional benefits. Some of the benefits are discussed below.
What are the benefits offered by gold loans?
- Substantial credit
An individual applies for a loan when there is a need for immediate financing. A gold loan fulfills this requirement by extending considerable credits. In addition, the flexibility of using this credit allows both salaried or self-employed individuals to initiate big-scale spendings. Business owners can use this credit to purchase assets or generate cash flow to stabilize the savings.
- No hassle of CIBIL score
There are times when the loan application gets canceled due to a poor CIBIl score or credit report. This stringency is absent in the case of a gold loan. Applicants can easily avail of this credit by fulfilling simple eligibility parameters.
- Easy repayment
Gold loan further offers borrowers the flexibility of repayment. For instance, individuals can repay the gold loan interest in installments or one go. This gives them the option to settle the principal amount as per financial stability. Borrowers can also choose to make regular EMI payments.
- Part release facility
A loan against gold extends a unique facility ie., part release. Borrowers get the privilege to release some gold articles equivalent to their pre-payment during the loan tenor. However, quantity and credit proportion completely depend on a lending institution’s policies.
The discussed sections are basic information about a gold loan and its properties. Being an affordable and convenient funding option, it makes for a lucrative monetary source during a financial crunch.
