Blogs - FEB 1 2023

Important facts to consider before taking a Gold Loan

Gold is popularly considered a good investment option in India and this is why most people possess gold jewellery. It is usually kept either in their houses or in bank lockers. One of the reasons why most Indian families hold onto gold is that the yellow metal retains its value over time, even if it goes through price volatility. And, in most cases, these families fall back on gold during tough times. Whether the challenge is raising funds for building a house, funding a child’s higher education, or even emergency medical expenses, a quick gold loan is the first back up for many. Availing a gold loan might seem very simple and easy at first. You might think that all you have to do is walk into a reliable gold lender’s branch and pledge your gold in return for a good amount of money. However, did you know that there are certain things you need to be aware of before you apply for a gold loan? Knowing these things in advance will help you not only maximize the amount you get from your gold loan but also ensure that it is protected. You will be able to repay the gold loan and get back your precious commodity.

Important points to consider:

  • Always avail gold loan from a reputed bank or Non-Banking Financial Company (NBFC) like LuLu Finserv, which is regulated by the Government of India. To make sure your gold is safe and secure in the hands of a trusted financial institution regulated by the apex bank.
  • The higher the purity of the gold, the higher will be the valuation amount, which means the higher will be the loan amount you get. The value of gems or precious stones in an ornament will not be taken into consideration when deciding the loan amount.
  • Following RBI guidelines, you will get 75% LTV on the value of your gold, as the loan amount, that too without checking your credit score. Very few KYC norms are required for quick gold loans. LTV ratio refers to the amount against the gold's value.
  • Loan repayment options, one of the most key factor to consider is the repayment option that you could consider while availing a gold loan. It can be Interest only repayments – where borrower can avail gold loan by payment of the interest on loan every month in instalments and the principal loan to be paid at the end of the tenor. Bullet payment: In this you pay the entire sum, including the interest at the time of maturity of your loan tenure.