Gold loan schemes are pretty popular these days, given the fact that the paperwork required is minimal.
In fact, the process is not cumbersome at all and loans are almost instant. However, there are various things that you should remember when taking a gold loan.
1) Interest rates on gold loans
Interest rates are pretty competitive and marginally better than personal loans. Currently, an established gold loan company is giving you gold loans at the rate of 12-13 per cent per annum.
2) Amount of gold loan you get when pledging gold
Usually, this guideline keeps changing. The Reserve Bank of India can alter the process from time to time. Earlier, it was loan to value of 80 per cent. It now stands reduced. So, explaining it is simple terms is that if your gold value is worth Rs 1 lakh, you would get a gold loan of around Rs 70,000.
3) Is your gold safe?
The gold handed over to the gold loan company is safely stored and so far, one has not heard of theft, or other related problems.
So, how do you take a gold loan In India?
Banks and gold loan companies like Mannapuram and Muthoot Finance, lend money against gold.
To take a gold loan, you need to complete the following steps:
1) Take your gold to the nearest bank or gold loan company
Approach the above and handover your gold to them. They will check the gold for purity. Apart from this they will also check for the weight and may want to include any stones that they may find not valuable.
They will than arrive at the weight.
Also read: Gold loan or personal loan: which to take?
2) Gold loan value
Once they arrive at the gold loan value, they will inform you the exact amount of loan. As a precaution take some extra gold. What this means is that if you believe your gold would be worth Rs 1 lakh and you want a loan of Rs 70,000, it may so happen that there could be purity issues and also stones in the gold jewellery. So take slightly more.
3) Furnish the following documents to take a gold loan
You would need an ID proof, that may include your driving license, Aadhar Card or passport. Just an acceptable ID proof would do.
4) You can service interest first
Opt for a scheme that allows you to first service the interest. Let us explain this with an example. Say you want a 6-months gold loan and you expect some money like bonus that could come in the month of Oct. So, till Oct, you service the interest and when you receive a lumpsum amount pay back the gold loan amount.
Our take on gold loan schemes
We believe that the easiest way to take a loan is through a gold loan scheme. It is fast and probably the fastest form of getting a loan. The interest rates are pretty competitive these days, though they are still higher than other secured loans like home loans and auto loans.
Go for it, only if you need money in an emergency. It is much better than servicing interest on credit cards, which can be as high as 36-45 per cent.