Gold loans are usually more economical than the other types of loans and are readily available in a situation of immediate financial need. A gold loan is a secured loan where the borrower pledges a gold article (an ornament or gold coins) with the lender who can be an individual or institution (Banks and Non-banking Financial Companies).
The formalities of a gold loan are very comprehensible and workable. The borrowers do not have to wait endlessly to avail of the benefits of the gold loan. Once the borrower has applied for the loan and presented the KYC documents with the collateral at the lender, the lending institution will process the application, evaluate the gold article and grant the loan after the signing of the loan agreement. The loan agreement consists of various terms and conditions of the loan such as:
Loan amount based on the gold loan per gram rate,
Gold loan interest rate,
Foreclosure terms,
Collateral details,
Default terms
Tenure of the loan,
and other related information. The gold loan per gram rates and gold loan interest rates of various banks or NBFCs is different. For the foreclosure, the banks and NBFCs charge a certain fee. The tenure of the loan is something that the borrowers can decide depending on their capacity. The credit score of the borrower is not considered by the banks for a gold loan but this doesn’t mean that the borrowers should apply for loans beyond their capacity because in case of default in repayment the lender has the legal right to auction off the gold article.
The bank's NBFCs provide an option of renewal of the loan where they extend the tenure of the loan when the borrower needs more time to repay the loan. Gold loans are usually taken for a short tenure but it may happen that the borrower faces inconvenience while paying back in a short period of time. In such a case the borrower has to make a request to the lender to renew the loan and give an extension in the term. The institutions provide a form of renewal and some of them even charge meager fees for the renewal process. So, if a borrower chooses to continue his/her loan after a year, they simply have to opt for a renewal.
HDFC gold loan policy allows the borrowers to make renewal and the fees charges are Rs. 350 (after including GST).
These are the terms and conditions that allure the borrowers towards a gold loan.
Also read:- Are housewives eligible to avail a gold loan?
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