Pledging Gold As Collateral For A High Loan Value – What’s The Process?
A high-value loan entails fulfilling a long eligibility list, which includes such things as a good CIBIL score and high choose-your monthly income. Also, the approval process itself can be lengthy.
Nevertheless, one cannot afford it if they have poor credit scores or are out of work at the time. In such a situation when you are in dire need of money quickly, your gold lying idle in the show case will come to your rescue. You can use it to get gold loans on affordable interest rates with short processing times either in Mumbai or other cities in India.
Nonetheless, one may still ask themselves whether this is possible for gold loans offered by banks and NBFCs. The answer is here; yes. The sections that follow explain how to secure a high-value loan as well as how to apply for a gold loan.
What do I need to know about high value Gold Loans?
Check the LTV Ratio Offered
Firstly, lenders don’t advance gold loans that equal the exact market worth of the jewelry being zapped at their shops. No lender will issue gold loan above 100% of the collateral value. It is instead limited by Loan-to-Value (LTV) ratio which also determines maximum loan available from any lender.
At present this ratio has been capped at 75% according to RBI guidelines but different lenders have different LTV ratios. Thus, if another lender provides an LTV ratio of 60% and you pledge jewellery worth Rs 10 Lakhs; you qualify for only Rs 6 Lakhs whereas if approached with an 80% LTV ratio bank two would give you up to Rs 8 Lakhs.
Take Gold Purity into Consideration
When applying for a loan against gold in Mumbai or any other city, purity plays an important role in determining its value on which a loan is granted. Karat measures gold purity and most lenders accept any gold article which has a minimum purity of 18K.
Gold ornaments contain alloys. Those less than 18K have various impurities like copper, zinc, cadmium etc. which bring down the metal’s purity and therefore its value. Thus, if you pledge 22K or 24K gold ornaments that are free from major impurities you will be able to secure a high-value gold loan.
Weigh Your Gold
The quantity of gold pledged determines how much loan one can get out of it. You must have at least 10 grams of the yellow metal in order to apply for the loan. The maximum permissible weight for gold coins is 50 grams according to most lenders.
Moreover, the formula used to ascertain the weight of your golden ornaments is specific. In calculating its total weight, lenders subtract from the actual gold article all precious gemstones contained therein in case it is studded jewelry type. It is on this stated weight that they approve the loan.
Check the Per-Gram Gold Price
Indian Gold prices are influenced by both internal and external factors alike. As stipulated by RBI since gold price changes every day so appropriately they go back using last month’s average per gram rates for valuation purpose.
Procedure for Gold Loan Application
If you’re pondering how to apply for a gold loan, there is no need to worry since it is easy. Below is an outline of the steps that one should take when applying for a gold loan in Mumbai and other cities in India:
Step 1: Fill-Up an Application Form and Submit your Documents
Before applying for a gold loan, compare and choose from banks and NBFCs offering such loans. Thereafter visit the lender’s website where you will find online gold loan application form.
Having done that there is a small completion of e-KYC process which involves uploading basic KYC documents such as your Aadhaar Card, PAN Card, address proof and photographs. Alternatively, you can go to the nearest branch office of the lender to complete the application process personally.
Step 2: Evaluation of your Articles
After this first stage you have to wait until you get a call from their 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 its physical branch office. Some lenders may offer evaluation services at your residence.
Step 3: Get the Funds in your Account
This means that they check whether the gold is pure or not depending on how much it weighs; then they evaluate it based on current market prices. Most lenders do instant evaluations and disbursals instantly while some have them later on after signing an agreement with them whereby once they sign a loan agreement with you, they keep your gold secure and transfer sanctioned amount into your account.
Obtaining A High-Value Gold Loan
Now that we know how to apply for a gold loan, securing one can never be difficult again. As high-value assets, lenders are confident about accepting these items as collateral especially if these are provided by borrowers who have good credit history. The intrinsic value of this precious yellow metal together with its historical highest price enable high-value loans.
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.
