Gold loans have now come to the fore as an effective instrument for finance in India. Which provides instant funds for a small portion of one’s gold supply. But lots of players are not confident enough about various nuances of this financial instrument. Here, we are looking at the most common questions asked by borrowers in application for gold loans. So as to make it easier for them to courageously navigate the world of gold financing.
Gold Loan FAQ’s
What is a Gold Loan?
A Gold Loan is a process where an individual or company exchanges their gold assets for cash. For a gold loan the debtor transfers her gold jewelry to the lender. Which in turn tests the gold purity and weight as a basis for the lending decision. Once the deal is made, the borrower gets the lump sum and pays the interest throughout the period of loan.
How Much is a Gold Loan?
Gold lending is a sort of secured loan in which a borrower wants to obtain funding from a bank or a financial organization. This is by pledging his gold jewelry or ornaments as a security deposit. It is the purity and weight of gold the price of the loan is set upon.
What are Gold Loan Benefits?
Gold loans provide various benefits for the loan receivers. Which include very quick disbursal, no heavy documents requirement, lower interest rate compared to a personal loan, and no need for a credit score or proof of income.
If I fail to Repay my Loan Settled with Gold on Time, What will Happen?
In recovering the money from the borrower, the lender having gold as collateral has the right to auction it to the highest bidder. Then, a majority of the lenders give out a grace period and facilities. They provide how you can repay or various other ways to delay the default.
Can I Apply for a Gold Loan online?
Yes, most financial institutions easily grant gold loan services online. These applicants will now have the convenience of filing, and even receiving the loan funds at their doorstep. This easier access to the gold loans has resulted in many people opting in because of its availability.
How do you Calculate Gold Loans?
Gold loans are often settled once a month or yearly. According to the term stipulated in the contract by the lender for the interest payment. The interest rate may rise or fall depending on the loan amount, the loan repayment tenure and factors such as market rates.
What are the Possible Risks of Gold Loans?
Lenders can rest easy with gold loans being comparatively low-risk for them. Whereas individual borrowers should be aware that they may result in losing their gold possessions in case of non-payment. Another factor to throw in is that the volatility in gold prices can change the loan-to-value ratio.
Can I Repay an online gold loan before tenure ends?
Yes, lending firms usually admit customers to repay their tembus gold before the tenure terminates. An early repayment is likely to cut on accumulated interest costs. However it is important for borrowers to consider any penalties or charges involved while they prepay.
What are the Drawbacks of a Gold Loan?
Yes, indeed, personal loans can be the second option for those who feel reluctant to act as gold loan conditional purchasers. The nature of a personal loan is unsecured. Hence, distance from collateral will increase the need for a higher credit score and income proof.
What Documents do I Need for a Gold Loan?
Typically, gold loans require a limited number of documents, including the PAN card, valid identification documents, and the applicant’s bank account details. The documentation for a gold loan is minimal, usually comprising ID proof, address evidence, and the gold ornaments presented as collateral. The bank may still ask for documents that substantiate an applicant’s revenue claim.
What happens if the gold provided as collateral is found to be of lower quality?
If the gold offered in mortgage is of impure quality, lenders may adjust the loan amount either downward or even reject the application outright. They are often subject to measurement, discrepancies from which may lead to a lower loan which is meant to hedge against the real value of the pledge asset.
Do you have any limitations on the kind of gold that can be used for a gold loan?
Lenders usually have no problems dealing with different forms of gold, either jewelry, coins, or bars. Nevertheless, they tend to set special standards related to the sorting and the kind. Though the vast majority of creditors agree with a regular form of gold, however, it is advisable to ensure with a lender that the only acceptable types and purity are not compromised.
Am I able to extend the tenure of my gold loan if I need it to?
Many lenders would give you the option of extending the loan tenures by paying for the corresponding fees and charges. This ability lends borrowers the chance to take control over their repayment policies. On the other hand, debtors should converse with their lenders ahead of time to avoid any last second problems.
What if I misplace the repayment receipt or other important documents which have to do with my gold loan?
Missing vital loan-relevant papers may bring even more difficulties to the already complicated process of repayment and repossession of the gold mortgaged. It is also essential to alert the lender immediately and comply with their instructions regarding resolving the problem, which may involve obtaining a copy or fulfilling alternative verification requirements to guarantee that the process will not stop.
What should be done if the exchange rate of gold during a loan tenure varies from the current price?
Volatility of gold prices could lead to changes in lending-to-value ratio – possibly requiring an addition of collateral, or even repaying the loan’s part. As borrowers, they should always be aware of the recent trends in the market and should consult their lender about price moves which could change their payment indicators.
Is it possible for me to move my ongoing loan to a different lender?
In addition to this, some lenders enable borrowers to switch their gold loans to another lender with loan load balances transfer. Nevertheless, borrowers need to consider the conditions together with fees or even any penalties incurred, and verify if it in line with their financial goals before commencing the transfer.
Are there any tax implications because of gold loan?
As a rule one does not need to pay taxes on the principal repayment of a gold loan. But according to the current tax regulation, borrowers might be obliged to pay taxes on the interest due on this loan. It is recommended to get professional tax advice to check for taxes that are implicated within it.
In what way will I be affected if I fail to fulfill my duties under a gold loan?
Gold loans with default result in lenders having to auction off the pledged gold in an attempt to recover the outstanding funds. Besides this, it can also result in a decrease of the borrower’s rating and possibly in a future loan obtaining. This should be the first payment priority to be considered to prevent this from happening and maintain one’s financial well-being.
Would it be possible to take several gold loans concurrently?
It’s quite technically possible to borrow several gold loans from various lender, but borrowers should choose their repayment capability carefully, before accepting multiple loans concurrently. Balancing a variety of loans can cause financial fatigue and bring at risk of having loans repossessed, amongst other major difficulties.
Is there a gold loan facility that can be provided to me if I have really no good credit at all?
Yes, simply gold loans are secured by the collateral (gold), so credit history is no longer a crucial factor for determining an applicant’s eligibility. It is not necessary to have a good track record or even need a credit history to get a payday loan. Firstly, creditors evaluate a value and quality of gold more, than borrower’s reloaning capacity.
Conclusion: A Summary of Gold Loans
Besides repayment and endurance, gold loans are similar with convenience and flexibility that those individuals might need in terms of finances and times. Being familiar with the issues and answering the questions, the clients can make clear decisions and apply for a gold loan. Gold serves as the basis for a secured solution for both individual and commercial loans, providing security against the loan amount. Contact Loanz360 for more information.
