What Is The Procedure For Pledging Gold To Secure A High Loan Value?
High-value loans have a long eligibility checklist, including requirements like a good CIBIL score and a high disposable monthly income, among other things. Moreover, the approval process itself can take some time.
However, opting for one becomes impossible if you have a poor credit score or are currently unemployed. In such instances, if you need immediate funds, the gold lying idle in your locker can come in handy. You can use it to secure a loan against gold in Mumbai or any other Indian city at affordable interest rates with short processing times.
While gold loans are popular loan products offered by banks and NBFCs, you might still wonder if you can get a high-value amount from the asset. The answer is yes. In the following sections, we elaborate on how to secure a high-value loan and explain how to apply for a gold loan in detail.
What Should I Check When In Need Of A High-Value Gold Loan?
Check the LTV Ratio Offered
Firstly, you cannot expect gold loans that are equivalent to the actual market price of the gold articles you’re pledging. No lender offers gold loans covering 100% of the collateral’s cost. Rather, the loan-to-value ratio or LTV determines the maximum loan amount the lender will sanction.
As per the RBI’s guidelines, this ratio is currently capped at 75%. However, this LTV ratio can vary from lender to lender. For instance, if you’re pledging gold worth 10 Lakhs and the lender offers a 60% LTV ratio, you would qualify for 6 Lakhs. However, if you approach a second lender with an 80% LTV ratio, you would qualify for a loan of 8 Lakhs.
Take Gold Purity into Consideration
When you apply for a loan against gold in Mumbai or any other city, the purity of the asset is considered to determine the loan value. The purity of gold is measured in Karats, with most lenders accepting gold articles only above 18K.
Gold ornaments are made with alloys. So, those below 18K come with various impurities like copper, zinc, and cadmium. This reduces the purity of the yellow metal and, thus, its value. So, pledging 22K or 24K gold ornaments with minimum impurities gives you the best chance of securing a high-value gold loan.
Weigh Your Gold
The weight of the gold you pledge determines the loan amount sanctioned. So, if you want to apply for a high-value gold loan, you will need to pledge more gold. The gold pledged must weigh at least 10 grams to qualify for a loan. For gold coins, lenders accept a maximum of 50 grams.
Moreover, the weight of your gold ornaments is calculated in a certain way. For studded pieces, lenders subtract the weight of all the precious gemstones from the actual gold article to calculate its total weight. The loan is then sanctioned against this stated weight.
Check the Per-Gram Gold Price
Internal and external factors play a role in determining gold prices in India. Since gold prices change daily, the RBI has mandated that lenders use the last 30-day per-gram gold rate average to determine the asset’s value.
Procedure for Gold Loan Application
If you’re wondering how to apply for a gold loan, you can rest assured that this process is pretty simple. Here’s how you can apply for a loan against gold in Mumbai and other Indian cities:
Step 1: Fill-Up an Application Form and Submit your Documents
To apply for a gold loan, you first need to compare and select from the banks and NBFCs offering this loan product. You can then visit the lender’s website and complete the online gold loan application form.
Once that’s done, you must complete a short e-KYC process. This includes uploading basic KYC documents like your Aadhaar Card, PAN Card, address proof, and photographs. Alternatively, you can visit the lender’s nearest branch office and complete the application process in person.
Step 2: Evaluation of your Articles
After this initial step, you will have to wait until you receive a call from the lender’s office. Your lender will soon assign executives for the evaluation process. Depending on the lender you pick, you might have to take the gold articles to the physical branch office. Some lenders may offer evaluation services at your residence.
Step 3: Get the Funds in your Account
This evaluation process assesses the purity of your gold, its weight, and its value based on the current market price. Most lenders offer instant evaluations and disbursals. After you sign a loan agreement with the lender, your lender will keep the gold safely and transfer the sanctioned amount to your account.
Securing a High-Value Gold Loan
Now that you know how to apply for a gold loan, securing one won’t be a problem. As a high-value asset, gold inspires confidence in lenders. The intrinsic value of the precious yellow metal, coupled with its historic high prices, make a high-value loan possible.
However, if you pledge this asset, you should always choose a reliable and established lender like a bank or NBFC. This keeps the asset safe until you can clear the EMI payments and reclaim it. Using the asset to secure a loan from local moneylenders won’t just result in lower loan value but also compromise the asset’s safety.