Myths Related to Gold Loan

A gold loan is essentially a loan you can avail of by pledging any kind of gold jewelry you possess. You too can avail of a gold loan from the nearest bank or non-banking finance companies (NBFCs). As long as the gold pledged has a purity of at least 18 karats, the borrower need not worry about the approval of the gold loan. In the case of banks, the borrower can take the loan by pledging gold jewelry or the specially minted coins sold by the bank, however, gold coins above the weight of 50 grams are not accepted. Whereas in the case of NBFCs, only gold jewelry can be pledged. And yes, a gold loan cannot be given for the purchase of gold in any form. Thus the borrowers should be clear with the purpose/motive of taking a gold loan. 

The biggest benefit of gold loans is that it is processed within an hour as gold is highly liquid, which comes in handy during emergency times. The only disadvantage of a gold loan is that if you fail to repay the loan, the lending authorities have full rights to auction your pledged gold to recover the loan amount. Loan against gold has been an age-old practice in India. Yet, It has been observed that people are hesitant about pledging their gold as collateral to lend money. If you believe that gold loans are unsafe, and have many drawbacks, then let us clear those all. 

The following are a few famous myths that need to bust. 

• Only jewelers can offer gold loans: This is the biggest misconception of all time. As stated above, banks (even the government banks) and NBFCs offer a gold loan. There are NBFCs present in the market only for gold loans. Also, this loan is government-certified, which makes it equal for all. There are specific guidelines issued by the RBI, thus everything is legitimate. 
• Gold may get swapped or misplaced: A fake moneylender may exchange your gold ornaments with lookalike ones, but certified banks and NBFCs will not. Your gold is super safe with the banks and NBFCs. They seal the packet containing your gold ornaments in front of you and store it in a highly secured locker room.
• Gold loans come with high interest rates: Gold loan interest rates and are comparatively lower due to their secured loan type nature. While it varies from bank to bank, the charge is 11-17% annually with a processing fee of 1-2%. NBFCs charge around 15-26% in spite of having a lower loan-to-value ratio. 

Conclusion: If you are in need of immediate funds, you should definitely consider a gold loan. Take your jewelry to the nearest branch of any SBI Bank or any other bank and get an SBI gold loan instantly.