A gold loan is a secured financing option that allows borrowers to obtain substantial funds against high-value gold ornaments. Based on current regulations by the RBI, lenders can offer up to 75% of pledged gold’s value. Since gold prices vary almost regularly, lenders assess the market value of your gold jewellery gold when you apply for a loan.
To make the loan affordable, you must look for a lender offering the lowest gold loan interest rate to save substantially on the repayment amount.
Prime factors impacting gold loan interest rates
A stable source of income reduces gold loan rate that the lender imposes against the loan amount you wish to borrow. This is because the lender is confident about your ability to repay the loan. Conversely, borrowers with a lower income may be charged higher interest rates.
Usually, lenders offer up to 75% of the total market value of your gold. If the value of gold is high, lenders may offer attractive interest rates because the risk of loss at their end is low. However, if you are unable to repay the loan, the lender will recover the amount by auctioning off your gold.
Therefore, in case the demand rises, supply does not increase simultaneously, which can cause the price of gold to fluctuate. In this event, it may be difficult to find a lender who is charging a low interest rate on gold loans.
Eligibility criteria and documentation needed for a gold loan
Like with every other financial product, borrowers need to fulfil certain eligibility parameters and submit necessary documents. However, in case of a gold loan, since funds are available against the value of pledged gold, lenders do not impose strict criteria. At most:
How to apply for a gold loan
Applying for a gold loan is simple and hassle-free. To ensure quick loan approval, you can approach a reputed financial institution like Bajaj Finserv and apply online. The steps you need to follow are:
Step 1: Visit the lender’s website and navigate to the gold loan application form
Step 2: Fill in the necessary details
Step 3: Verify your identity with the OTP sent to your mobile number
Step 4: Submit the loan application
Step 5: Visit the designated gold loan branch with your ornaments at the scheduled appointment time
To summarise, before applying for a gold loan, you must consider the gold loan interest rate as it will determine your repayments throughout the tenure. Therefore, do not rush into obtaining a loan and thoroughly research lenders, so that you choose the most affordable loan product.