How to take loan against gold

Posted by: Girija Gadre on Jan 08, 2018, 06.30 AM IST

Banks can provide quick finance to customers against the security of gold (in the form of jewellery or otherwise). The amount of loan that can be sanctioned depends upon factors such as purity of gold, form (bars or jewellery), tenure of loan etc.

Quantum of loan
The amount of loan depends upon the kind of security that is deposited in the form of gold and the applicant's repayment capacity. Coins and bars offer higher value than jewellery. Typically up to 60% of the value of gold is offered after valuation.

Documentation
Loan application can be made online or by visiting the bank branch. Only specifi c branches can provide gold loans. Photograph, PAN, identity proof and address proof have to be provided with application.

Deposit of gold
Once the application is submitted, a gold loan agreement is signed between the customer and the bank. Next, the gold that has been valued is deposited with the bank for disbursal of loan. The bank keeps custody of gold till loan is repaid. Loans typically have tenure of 12 to 18 months.

Charges
A loan processing fee as well as gold valuation fee is charged.

Default
If there is a default in repayment, the bank or fi nance company can sell the gold that is hypothecated and recover its dues as per the terms of loan agreement.

Points to Note
1. Loans against gold can be disbursed as quickly as one working day.
2. Gold deposited by the customer is kept safely in a vault in a strong room and on repayment of loan, it is returned to the customer in the same state as it was received.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.
This article appeared in Economic Times dated Jan 08, 2018, 06.30 AM IST