Till not very long ago, gold or gold jewellery was considered to be most sacred of family possessions in India, and a family would do its all to avoid selling it or mortgaging gold for taking a loan on it. But, slowly but steadily things are indeed changing in India with many gold loan companies setting up shop and driving home the point that there is nothing wrong in taking loan over gold. One of the gold loan Finance company asks" Jab Ghar me pada hai sona toh phir kyun hai rona?". This has resulted in huge off take in gold loan sales in the country . But does it make sense for you? Do you really understand what it is ? How can you take benefit from it ? Lets try and understand each of these in the following paragraphs.
GOLD LOAN - What is it?
Gold Loan is a loan given against the security of the gold bar/coin or jewellery . The loan seeker needs to mortgage his/her gold with the bank/NBFCs against which they get loans upto 75% to 95% of the gold value. These are like Personal Loans where the end use of the loan amount is not defined and the amount may be used in any manner as deemed fit by the borrower.Since these loans are backed by security of gold , the banks/NBFCs charge much lower rate of interest on these loans as compared to lets say a Personal Loan which is unsecured.
Who Offers These Loans? Most of the banks in India like HDFC Bank, ICICI Bank, Axis,SBI etc offer Gold Loans. Other than banks there are dedicated gold loan companies like Mannapuram Finance, Muthoot Finance which exclusively deal in Gold Loan.Most of the gold loan companies have very wide network and are open on Sundays too,thus making it eminently easy for the borrower to seek loan at his/her convenience.
Loan Amount? Most of the gold loan financers(NBFCS) provide upto 95% of the gold value as loan to the borrower. But if you approach a bank, they are likely to be conservative in their financing and may be willing to offer only upto 75% of the gold value as loan.But to balance that there rate of interest is lower.So you must decide basis that.If you dont want very high loan amount,it may be prudent to approach banks which will give you gold loans at atleast 2-3% lesser than Muthoot Finance, Mannapuram Finance etc.
Benefits of taking Gold Loan? There are quite a number of compelling benefits which make gold loan a very good option for lot of borrowers. Some of the major ones are
1.Quick Loan Disbursal - Gold Loans are probably the loans with smallest TAT(turn around time). You can walkin with your gold coin/bar/jewellery and walk out with loan , all in the smae day in matter of couple of hours.
2.Safety and Security of your Jewellery- Since the gold jewellery that the borrower mortgages with the financier is kept in safe custody of the bank/NBFCs , it ensures that the same is in safe and secure custody .This also reduces the cost that the person might be bearing on account of keeping that jewellery in a bank locker on his own. bank Locker rent is thus saved while the jewellery still stays in bank locker only.3.Lower interest rates - Since these are secured loans, the rate of interest is much lower than a plain vanilla Personal Loan.
4.OD Facility- Some banks also provide overdraft facility on your gold jewellery. This helps those who dont want to take EMI based loans and want to just have facility of overdraft where they pay interest for only usage period .
So next time when you are in urgent need of money , then rather than going for Personal Loan, you may want to consider unlocking the value of gold jewellery in your home .