Borrow funds easily against your gold

6 MinsApril 13, 2022

Gold has always been revered in India, and rightly so. The precious metal is seen as a mark of wealth, prosperity, and a store of value! If you are in need of funds, for whatever reason, you could easily avail a loan against the gold you own. It could be in the form of jewellery or bank issued coins.
But often, the gold you own holds an emotional value. You may have inherited the jewellery or purchased it for a special occasion, such as weddings and so on. That is why it makes sense to borrow a loan against your precious metal rather than sell it during your times of need. Let us look at the benefits of a gold loan and the factors to keep in mind while availing one. 

Borrow funds easily against your gold

Get the loan at a competitive interest rate: 
A Gold Loan is a secured loan, i.e., physical gold is the collateral pledged with the bank. Due to this, the rate of interest on a Gold Loan is lesser than the interest on an unsecured loan, such as Personal Loan. Axis Bank offers Gold Loans ranging from Rs 25,000 to Rs 25 lakh at a very competitive rate of interest (involving simple interest calculation), plus the processing fee is minimal so that you pay less upfront. 

Borrow as per your needs:
A loan amount is fixed as a certain percentage of the value of the gold you pledge. This is commonly referred to as the ‘Loan to Value’ (LTV) ratio, which usually is 75% of the value of the gold and its purity in caratage. 
If, for instance, you pledge your gold jewellery valued at Rs 2 lakh with a bank, you may be able to raise around Rs 1.50 lakh as the loan amount. Having said that, the bank will also evaluate your repayment capacity. 

Your gold is safe:
You don’t need to worry about the gold pledged with the bank. It is kept safely in a bank vault, in a tamper-proof box, and a security certificate is issued to you, the borrower. So, a Gold Loan comes with a 3x security feature.

Also ReadNeed funds in a hurry? Put your gold to work]

Repay at your convenience:
As a borrower, you have the option to choose the tenure of the Gold Loan, which could range from 6 to 36 months. Further, as regards the repayment of your Gold Loan, most banks/NBFCs provide flexible repayment options, such as:

  • Pay the interest upfront and repay the principal amount on the maturity date; or
  • Pay the interest monthly and repay the principal amount on the maturity date (referred to as ‘Bullet Repayment’ as the loan repayment in one single shot); or
  • Pay in the form of Equated Monthly Instalments (EMIs)

All you ought to do is select the option that is convenient for you.

In case you miss your repayment, late payment charges as applicable may be levied. Do note that missing loan repayments or not repaying your loans on time does not reflect well on your creditworthiness and may have a bearing on your credit score. Hence, make it a point to timely repay all your loans as far as possible. 

How to get a Gold Loan:
SAll individuals between 18 and 75 years of age are eligible for a Gold Loan and can apply with the following documents:

  • Signed application form
  • Age proof 
  • Address proof
  • Photo ID proof
  • Signature proof
  • PAN Card / Form 60
  • 2 passport size photographs

And of course, since your physical gold (ornaments or bank issued coins) is pledged with the bank, a co-applicant is not applicable.

The loan usually gets disbursed on the same day when the bank/NBFC receives your application along with all necessary documents and the gold. 

Use the Gold Loan Calculator:
When you are considering availing a loan against your gold to get quick access to funds, use the  Gold Loan calculator. All you have to do is simply mention the form of gold you have (ornaments and bank issued coins), its weight, and caratage in the fields mentioned in the online calculator. After submitting the details, you will be able to know the amount of Gold Loan you are eligible for against the gold you wish to pledge with the bank/NBFC. 
Gold possesses the trait of being a store of value. Besides, the easy and convenient process of applying for the Gold Loan, makes it a suitable option to raise funds to meet your needs. Apply for a Gold Loan here!

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm. Axis Bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.