Getting a Gold Loan – Do you need money urgently, and you have gold jewellery on you? Instead of requesting a marriage loan or an education loan, you can decide to take a gold loan. Supporting this is www.buddyloan.com, visit this site for availing better benefits of a gold loan for lower interest rates.
This type of loan will fill in for the urgent short term need for money.
After you pay back the money, you will get back your gold. This is way better than selling the gold to get the money.
Definition of Gold Loan
When you pledge your gold jewellery with a lender in exchange for a loan, then that is referred to as a gold loan in India. You will later pay back this amount in the period you will have agreed with the bank. The loan tenure is usually short term and ranges from 3 months to 12 months. The loan is less strenuous than applying for a regular instant loan.
The Banks have a Limit Too:
The lender usually advances a percentage of your gold’s value as a loan. Various factors affect the cost of the loan you get from the personal loan provider. The value of your gold determines the amount of investment.
- The gold loan has a lower interest, and thus you can pay it by faster by increasing the EMI.
- The purity of the gold determines the amount of credit that you will get from the bank.
Application Process
The application process is easy and can be done by anyone as long as they have a PAN number. The primary collateral in this type of loan is the gold, and so both salaried and business people are eligible.
You will need also to have your identification and proof of your address. Some lenders will ask you for more documentation like the PAN card or the Aadhaar card, from which they will conduct their customer information search.
The lender, after assessing the value of your gold and receiving the documents, will sanction the loan. Some providers will also conduct an assessment of your home. The lender will then credit your account with the agreed amount.
Point of emphasis when you are pledging your gold is:
- Make sure you know your loan to its exact -value
- Check through enough options to ensure you arrive at the best option.
- No, your gold, this way, you know your value to avoid being shot changed.
- Make sure you understand your EMI options.
Check out enough options to enable you to compare and come out with the best deal.
Tax Exemption on a Gold Loan
Define Gold Loan
It is a fixed amount of money that is acquired at a fixed interest for an agreed period. Supporting this is Buddy Loan App, visit this site for availing better benefits of student education loan for lower interest rates.
The amount of money that the bank gives the borrower is dependent on their CIBIL score. Depending on your gold loans end-use, you may claim tax exemption. Gold loans online fall into two categories namely
Unsecured Gold Loans
- These loans are eligible to salaried borrowers. They should earn a minimum of Rs 12000 monthly.
Secured Loans
- The bank loans the borrower and gold loan against collateral.
Factors Affecting gold Loan Approval
- Your credit and payment history
- Your income
- Your company status
- The relationship with your bank
- Your negotiation skills.
Features of a gold Loan
- The loan is paid in fixed equal monthly instalments over an agreed period.
- A gold loan has fixed terms that are agreed upon before the loan is disbursed.
- It has an interest component that may be computed on a flat rate or reducing balance.
- There are many options to choose from. They vary from salary advances to long term personal loans.
- You may use the money for any purpose
Gold loans in India are not eligible for tax exemption. However, depending on the purpose for which you used the loan, you may claim tax exemption. You have to present the important documentation that will support your claims. Also need to have the right documentation like:
- The sanction letters
- Expense voucher Auditors report
- Bank certificate
- Purchase or construction of a residential property
You can claim tax under sec 24 of the Income-tax acts when you use the Gold loan like a home loan. When you use the credit advanced to renovate a residential home or to purchase property, then you claim tax exemption under the gold loan interest paid.
- Business purposes
The gold loan interest is tax-exempt when it is used in business. The interest paid is deducted from the profit before you calculate your tax liability. You, therefore, get tax relief.
- Purchase of an asset
The amount of interest you incur when you purchase an asset is added back to the value of the asset. When you eventually want to sell the asset, your capital gain tax liability is reduced and thus is a benefit to you.
- Home improvement loan
If the end-use of your gold loan is on a home improvement loan, then you can apply for tax exemption. This is stipulated clearly under sec 80C.
Gold as Money!
A gold loan is a loan given by a bank or institution to an individual who pledges their gold jewellery for money. The gold should be within a range of between 18 to 24 carats. The loan amount is a certain percentage of the current gold price, as well as the quality of the gold. This will vary from bank to bank and is typically up to 80 per cent.
The bank will also require certain documents, after which the gold loan will be approved and sanctioned. To make the process easier and clear, availing gold loan through a loan aggregator, Buddy Loan, can help fit your profile to the organisation and disburse loan with very few necessary documents online.
Documents Required for Gold Loan
Different banks ask for a different set of documents. Some of the common documents required include Passport size photograph, PAN, Voter’s ID, Aadhaar card, passport, driver’s licence, electricity bill, income proof, identity proof and address proof, etc.
Key Features of Gold Loan
Taking a gold loan from a bank or a financial has some features which are more advantageous than a loan. These features include
Quick Disbursal
Minimum documentation required and faster processing time because the loan is secured by your gold.
No Restriction on Use of Loan
The loan can be used in any manner or for any purpose. As the loan is not for a specified purpose, the loan is not monitored. This gives you the flexibility to meet any immediate expenses
Secured Loan
Other than the pledged gold jewellery there is no need to provide any other collateral or guarantor required
Lower Interest Rates
As this is a secured loan, the interest rate is comparatively lower than a personal loan and other types of loans, the interest rates begin at 11.99% p.a.
Easy Liquidity
Gold jewellery is generally an idle asset lying at home or in the bank locker. Gold loans provide instant liquidity when an emergency arises or when an undeniable expense is anticipated.
Foreclosure of Gold Loan
The gold loan is considered a short-term loan and has a tenure of 1 to 5 years. However, the Gold loan can foreclose the loan before the tenure lapses. While some banks do not charge a foreclosure penalty, some of the banks will levy a charge of 2% to 4% of the outstanding balance.
Final Word
Before you sign on the dotted line, it is advisable to check and compare the interest rate, processing fee, late payment penalties, pre-payment charges, and other hidden costs so that you are not taken by surprise when these payments are to be made.
While taking a loan, one should be sure that the loan can be easily returned. Defaulting on a loan will adversely affect your credit rating, and you will find it difficult to get another loan.
EMI Calculation for Gold Loan
Define EMI
EMI is the equal monthly instalments that you pay back to the lender when you apply for your gold loan. Supporting this is www.buddyloan.com, visit this site for availing better benefits of a gold loan for lower interest rates.
You can take the gold loan in place of a marriage loan or a travel loan, and then you pay back to the lender in equal monthly instalments.
The EMI options:
- Pay partial payments
This option is customer-centred and a privilege for gold loan customers. The customer pays back an amount of interest and principal when he can. There is no strict need to stick by the EMI schedule. The client may opt to pay the whole amount of loans when they get the money, and there is a reduced interest rate.
- Bullet payments
In this option, you do not need to service EMI schedules. You also do not need to pay fees during the loan tenure. However, after the loan tenure, you will need to pay the whole principal and interest rate amount.
- Regular EMI options
This option is available to salaried individuals and those that have a steady flow of income in their accounts. Their EMI payment is similar to that one that they pay when they take a marriage loan or any other personal loan.
- Pay interest as EMI and principal
This option would be preferable to those people who expect some lump some money in the future. You only pay attention to your equal monthly instalments without the principal amount. However, you will pay the principal amount as a whole after you finish paying for the interest.
Also Read: Gold Loans During Lock-Down & Easy Documents!
Steps to Calculating your Gold Loan
Depending on who your lender is, they will opt to calculate your EMI in different methods. This depends on what is their best practice.
They may have an online calculator in which you fill in the details and get the EMI you will be paying monthly. The details are as below.
- Fill in the value of the gold you want to pledge
- Enter the interest rate the bank is offering
- Enter the number of months you intend to pay the loan.
You can also use the EMI calculation mathematical formula to calculate your gold loan, which is similar to how you calculate the EMI on your loan EMI.
EMI= [principal*rate*(1+rate) ^number of repayment periods]
[(1+rate) ^number of repayments periods-1
You can also calculate your EMI by invoking the PMT function of the Microsoft Excel sheet. The key factors are the principal amount, the interest rate, and the tenure of the loan. Then you will discuss with the lender for a final decision.
Perks of Availing of a Gold Loan:
Fastest processing loan:
One can always save time and energy for this personal loan. Since gold loans are solid physical gold, the request or the approval materializes faster. Ideally, this loan is safer for banks, NBFC, as this is a secured loan. Defaulting this loan can only make it worse for the borrower. This is one reason why banks disburse such loans in less than the expected time.
Easiest repayment option:
Yes! The gold loan has the easiest repayment process and all benefit from this. It has a unique advantage for the borrower, wherein he/she can choose to repay the interest amount before and the principal amount later. Closing the loan with these options can help ease the process of repayment.
Lowest interest rate just for you:
This calibrates to the highest benefit, the interest rate factor. This type of personal loan offers lowered interest rates to borrowers. The range could vary depending on different organisations.
However, interest rates for a gold loan start from around 13 percent, thus making it more affordable for the average Indian.
No processing fee:
As gold loans are disbursed instantly to waive off processing fees. This is all the more because, the physical gold is considered as collateral, which the bank already keeps with itself for a certain duration.
Credit history is not an issue
Availing a personal loan from banks, NBFCs, usually, you might have to check for credit history. If the credit history is low, there are high chances of loan applications getting rejected.
However, there is no such thing required to avail a gold loan. Unlike other personal loans online, the gold loan needs physical assurance with the bank. Hence, it doesn’t demand a credit history.
Concluding on the fact that gold loans have a lot of benefits besides being a secured loan. It doesn’t have any complications and can rescue both salaried, non-salaried during the dire need of money.
It is always advisable to do a fair bit of research on the interest rates and best-performing gold loan before availing one.
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