A gold loan is a secured credit facility where the borrowing individual or entity will have to present the lending institution (banks and non-banking financial companies) with a gold article in any form. The collateral is a must requirement here. The collateral presented has to be as per the lender's criteria and standards. The lending financial organization (banks and non-banking financial companies) will grant the borrowing individual or entity financial resources as soon as they have assessed the security. The procedure is not lengthy and is attainable. The credit facility granted against the precious yellow metal has a shorter processing time, and it means that the funds can be disbursed to the borrower within a few hours.
The interest charge is affordable in this credit facility, and the supplementary costs attached are trivial. Besides the monetary benefits, there are some other uses of receiving funds from this facility. The borrowing individual or entity does not have to endure a torturous process of arranging documents and managing paperwork as they only have to provide KYC documents. Kerala Gramin Bank's gold loan policy can be reached without heavy paperwork and with minimum documentation. A borrower can apply for it through an online platform as well if needed.
The credit amount in a secured loan facility like a gold loan is based on the object's market value. The quantity and quality of collateral are other factors taken into account while assessing it. The amount determined is as per the set directions of the lending financial institution (banks and non-banking financial companies). All assets have some fair value assed depending on what is the demand for that particular asset in the market. The worth of the asset will be a determining factor of the loan amount. The borrowing individual or entity should keep tabs on the changes in the rate. The rate used for this facility will be the gold loan per gram rate.
Any gold objects can be used for applying under this loan facility, such as coins, blocks, any ornaments, or anything made of this yellow metal. The purity of the gold object varies. One must have heard that the value for 18-carat, 22-carat, and 24-carat is different. For the different levels of purity of gold, the amount will be different considering the quantity. Still, there is a specific level of pureness required to avail of funds against it.
The gold loan per gram rate will be different for varying degrees of purity. The lender will not give away the entire value of the yellow metal as a credit to the borrowing individual or entity. Whether it is a bank or non-financial banking company, the lending institutions will block a part of the value of the object as their margin of safety. The margin of safety guards the lender against any rigorous variations in the gold price in the market.
The margin is around 20%-30%, which means the amount extended will be 70% to 80%. The amount extended is using the loan-to-value ratio. Recently, the Reserve Bank of India increased this ratio to 90%. Higher ratios lead to a higher amount. The borrowing individual or entity needs to look out for the lender who provides a good loan per gram rate and a higher loan-to-value ratio to make the most of this facility.
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