The current economic downturn has significantly shrunken middle and lower-class household earnings in India. This has led more individuals to opt for gold loans to mitigate the rising cash crunch and meet unforeseen expenses. As a result, India’s gold lending market expects a growth somewhere between 15-20% Y-o-Y in the upcoming two years. One of the driving factors behind this hefty spike in demand can be easy gold loan eligibility criteria. Till May 2021, the gold loan segment witnessed a record-high credit growth of 33.8%.
Following is an elaboration on the gold loan documents and eligibility criteria that potential borrowers must fulfil before availing of this advance.
What are the Gold loan Eligibility requirements?
A prospective borrower only needs to submit KYC as proof of his or her repayment capacity. Here are the documents required:
Identity proof
- PAN card
- Aadhaar card
- Passport
- Voter ID card
- Driving license
- State or Central Government-issued photo identity card
- Defence ID card
Address proof
- Aadhaar card
- Ration card
- Passport
- Voter ID card
- Bank account statement
- Any utility bill like electricity or telephone bill (maximum 3 months old)
- Letter from an authorised person
Lenders may ask to present income proof along with these above-listed documents if necessary.
Reputed NBFCs like Bajaj Finserv extend gold loans against minimal documentation to facilitate easy approval.
Who all can avail of a gold loan?
As mentioned earlier, one can easily opt for this credit facility due to flexible gold loan eligibility parameters. Be it salaried or self-employed individuals, traders, farmers or any other professional – if one has enough assets to seek an advance against them, they are good to go. The only catch is- an applicant has to be aged between 21 to 70 years.
It is important to note here that lenders only accept gold ornaments as collateral. Gold bars or coins are not accepted as viable collateral. Ornaments should also range between 18 to 24 carats.
How to apply for a gold loan?
Due to digitalization, pledging your gold ornaments does not call for a complex process.
Below are the steps to follow to apply for a gold loan successfully:
1st Step : Visit your preferred lender’s official website.
2nd Step: Click on the Gold loan application section.
3rd Step : Fill up requisite details.
4th Step : Click on ‘Submit’ for initial approval.
5th Step: Connect with the lending institution’s representatives to submit documents and complete the evaluation procedure.
6th Step: Post submission, concerned authorities will visit the borrower’s house for verification of the gold article.
7th Step: Once satisfied, an applicant will receive the loan amount within a few hours.
What is the highest loan amount one can secure per gram?
The highest loan per gram denotes the maximum loan amount an individual can avail against the market value of one-gram gold. This amount is known as LTV or loan-to-value ratio, measured in percentage. The lender calculates the prevailing market value of gold before determining the LTV.
Note: Reserve Bank of India has capped LTV for gold loans at 90%. This has almost doubled the outstanding gold loans to Rs.60,464 crore in FY21 than the previous year.
Why opt for gold loans?
Gold loan stands as a better financing option than other credit facilities for reasons such as:
- Lower interest rates
Gold is one of India’s most valuable assets, thus, lenders tend to charge lower interest rates against this credit facility.
However, interest rates may vary from one lender to another. Existing customers of a lending corporation are in a better position to negotiate for a competitive interest rate.
- Flexible repayment options
- One can pay the interest rate only when the tenor begins and clear off the principal later.
- Individuals can pay through EMIs, including both interest and principal.
- Borrowers can opt for a monthly or quarterly interest repayment and pay principal at the end of the tenor.
3. No involvement of credit score
New borrowers and ones with poor credit scores can utilize this financial option by pledging gold jewellery.
Consider these points before opting for a gold loan. Also, a gold loan eligibility calculator will help one evaluate the amount he or she can avail to meet any short-term financial emergency.
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