Question 1

What is gold loan and how it works?

Accepted Answer

The term "gold loan," also known as "a loan against gold," refers to a secured loan that a borrower accepts from a lender against pledge of gold jewellery or other items. Lenders typically approve you for a loan in an amount that corresponds to a particular portion of the gold's value. You can receive your gold items back after repayment of the gold loan as per terms of sanction. There are no limitations on the end-use of gold loans, unlike other secured loans like a home loan, business loan or auto loan. So it's a great option to meet your urgent financial needs, whether it's for a wedding, family trip, or your children’s school fees.

The entire gold loan process is very similar to other secured loans. In this, you give your gold articles to a lender for pledge along with the required set of documents. The lender evaluates the gold articles and verifies the submitted documents. As per the evaluations, the lender sanctions the loan amount. As per the loan agreement, you pay off the interest and principal amount and after the full and final repayment of the loan you get back your pledged gold jewellery and articles.

Question 2

What is the benefit of gold loan?

Accepted Answer

India is one of the major importers of gold in the world, therefore, a significant number of people own gold ornaments. People are using idle gold jewellery to meet their immediate financial requirements by availing loan against it. Unlike other financing options, gold loans have turned out to be of great value in times of crisis.

There are certain benefits that applicants can reap from this kind of loan from Swastika. Some of them are mentioned below.

Lower interest rate
    Being a secured loan, gold loans are generally subject to lower rates of interest as compared to other financing options such as personal loan, home loans or other secured loans.
    Faster processing
    As gold loans are backed by physical gold, it thus involves lenient eligibility criteria and minimal documentation. This enables lenders to process the loan faster.
    Enjoy anytime liquidity
    Gold loans are also termed as ‘ATL’ which means anytime liquidity. This means that you can avail a loan in less than 30 minutes without the need for excessive documents and paper formalities, unlike other financing options. This feature helps you to get an instant loan against gold whenever you require it.
    Option to pay interest only
    Gold loans have a unique feature where the borrower has the option to pay only the interest part during the loan tenure and the principal amount at the time of closing the loan.
    Offering some more flexible repayment scheme of finance like
    Gold loan as overdraft facility– A credit limit will set as OD limit based on current value of gold. Loan amount can be withdrawn within this limit for saving of interest, because interest is applicable on the drawn loan amount for the period of actual use only. Loan amount can be repaid fully or partially as per financial convenience of the borrower
    Repayment option in EMI’s– Repayment can have made in Equated Monthly Installments (EMI) to cover repayment of interest and principal. Borrower can choose the period of repayment at his/her financial convenience.
    No foreclosure charges
    Unlike other loan options, there are no foreclosure charges or prepayment penalty on paying the loan amount before the loan tenure.
    Income proof is not required
    Financial institutions generally do not ask for any income/salary proof from the applicants as the loan is secured against gold. Therefore, anyone can apply for a gold loan whether you are a salaried or a self-employed individual.
    No requirement of credit score
    Unlike most loans, gold loan approval does not depend on your credit score. In this case, the loan amount is based on the market value of gold. But by taking a gold loan, you can build up a good credit score.
    Safety of gold
    The financial institution offers triple-layered security for gold ornaments that you submit as collateral. Your gold will be kept secured in their vault throughout the time; you will get your gold jewellery back when you repay the loan amount in full.
    No restriction on the end-use of the funds
    Since there is no monitoring of the end-use of the funds availed through this loan, it gives you the flexibility to use the loan to meet any type of expense such as home repairs, higher education, marriage expenses, medical emergency or any other urgent financial requirement.
    Eligibility for gold loan
    Anyone who has gold can get a gold loan. Unlike personal loans, which include stringent eligibility criteria, gold loans can be availed by any Indian resident, which can include salaried professionals, businessmen, housewives, and even farmers. You don’t even need to have a good credit score to be eligible for a gold loan. So if you have a low credit score, you still have a chance to get funds, provided you have enough gold to pledge for it.

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