Gold loan or loan against gold jewelry is the quickest and easiest loan option, when you unrgently need money. You can pledge gold or gold ornaments as collateral security and can avail money for your emergencies. You need to submit gold with proper identity and residence proof to get a gold loan. Normally no any surety is required for gold. Some specialized bankers for gold loan will give you money against gold loan within one hour in any working time of the bank.
Margin of Gold Value and Loan Amount
Near about 60% of the market value of the gold will be available as loan.
The interest rate may be comparatively less if the margin of market price of gold and the amount you required as loan is bigger. For example if you need only 50% of the value of gold as loan, the interest rate may be lesser than 60% of the market value as loan. Loan insurance or loan protection insurance
Disadvantages of Gold Loan
If the person who takes the loan has not paid interest and the principal amount in time, the gold you pledged may be sold by the money lender and close your loan account. Then you won’t get back the gold. Normally ornaments have an emotional value and most of the cases the person will pay back the amount in time and get back the gold he or she pledged in.
Gold loan pay back pattern
The money lender will check the quality of the gold you submitted for pledging before allowing you the loan. You can pay back the gold loan in various repayment patters as agreed with the money lender.
- Paying interest on loan in regular installments and the principal amount at last when you closing the loan account. If you follow this method you should pay back the principal amount only at the closing of loan account and the simple interest may be charged for the entire terms of loan
- Paying principal amount and interest in regular installments such as EMI and when the last installment is paid the loan will be over. The principal amount will be coming down as you pay in installments and you can pay off the loan amount within a stipulated time span. The interest will be charged only for the remaining loan amount after each installment.
- Paying principal amount an interest together at the time of closing the loan account. The interest may be charged in compound interest method and the person who takes the loan should pay a bigger amount at the time of closing the loan and sometimes he or she could not pay off the loan amount and the gold may be sold by the money lender to compensate his loan amount and interest. Read Various methods of repay your loan amount
Interest of Gold loan
The interest of Gold loan is varying from bank to bank and from money lender to money lender. As a good collateral security the interest must be less than unsecured loan. The interest rate may vary as per the variation of margin between the market value of gold and the loan amount. however the lowest interest rate is 12% and the highest interest rate is 17% for gold loan. Some private money lenders may charge higher rate of interest.
Almost all banks and some private money lenders give loan against gold or gold jewelry. Gold is a precious metal and convenient to sell it off easily. Most banks are ready to give loan against gold without any hard and fast procedures. You can pledge gold etfs also for gold loan. But deal with care and take a gold loan only when you are in emergencies.