look news india
While there is an atmosphere of light and happiness all around during the festive season, there is often an immediate need for lump sum cash for home renovation, expansion of new business, advance purchase for weddings or to repay old expensive debts. At such a time, instead of getting entangled in the strict formalities and paperwork of personal loans, the country’s leading banks and non-banking financial companies (NBFCs) have opened a box of special festive gold loan offers for the customers. In these new campaigns introduced under “Keep Gold and Get Money Instantly”, customers can avail huge instant loan amount up to Rs 60 lakh against their home jewelery or approved gold coins. Huge discount in processing fees, concession in interest rates and the facility of direct transfer of money to the account within 30 to 60 minutes have made it the most popular financial instrument this festive season.
Usually, when a person applies for an unsecured personal loan or credit card in a bank, the first thing the bank checks is his credit score (CIBIL Score). If the CIBIL score is below 700 or 750, either the application is rejected or extremely high interest rates are imposed. But in the world of gold loan this rule changes completely. Gold loan is a secured loan, where your pure gold remains legally collateral in the secure vault of the bank. Since 100% security in the form of gold is available with the financial institution giving the loan, CIBIL score does not become a primary condition for approving the loan. Even if a person’s credit score is damaged due to some past dispute or default, he still gets an instant loan based on the purity and weight of the gold without any hassles. On the contrary, by paying gold loan installments on time, you can also improve your deteriorated CIBIL score faster.
The total amount available in gold loan is determined under the loan-to-value (LTV) guidelines of the Reserve Bank of India (RBI). As per current banking rules, banks and NBFCs can disburse up to 75% of the market value of gold as loan. That is, if the net market valuation of 18 to 22 carat gold pledged by you is Rs 1 crore, then the bank can give you a maximum loan of Rs 75 lakh. In such a situation, to get the maximum loan of Rs 60 lakh, you must have pure gold worth about Rs 80 lakh. The loan value is calculated only on the weight of pure 22K or 18K gold after deducting the weight of gems, pearls and impurities in the gold during appraisal. Gold prices running at record levels have given a golden opportunity to customers to avail higher loan amount than before even against light weight jewellery.
The biggest feature of Gold Loan is its unique and flexible repayment options, which are quite different from the traditional monthly EMI of Personal Loan and are stress-free. Customers can choose the repayment mode as per their convenience and cash-flow. The first option is ‘Bullet Repayment’, where you do not have to pay any EMI every month during the loan tenure (say 6 or 12 months); On completion of the tenure, your jewelery can be redeemed by making a lump sum payment of principal and interest. Another option is ‘Monthly Interest Only’, where you pay only a nominal amount of interest every month and return the principal amount at the end of the loan, leaving no strain on the monthly budget. The third option is of regular EMI, and the fourth option is of ‘Gold Overdraft Facility’, in which interest is charged only on the amount you withdraw for the number of days out of the sanctioned limit of Rs 60 lakh.
Often people have a doubt whether their ancestral gold kept in the bank will be safe or not. Let us clarify that all authorized banks and reputed NBFCs keep the pledged gold in sealed packets in their high-security fire-proof strong rooms and it is 100% insured. The application requires only minimum KYC documents—such as Aadhaar card, PAN card and passport size photograph. There is no requirement of any salary slip, income tax return (ITR) or balance sheet. However, while taking a gold loan, it is very important to keep in mind that if you are not able to repay the interest or principal within the stipulated time limit, then the bank can recover your dues by auctioning the gold after issuing a notice. Therefore, take the loan amount only after accurately assessing your actual repayment capacity so that the family property remains completely safe while meeting the financial needs during the festive season.