How to Apply for a Gold Loan

Gold Loan are a popular financing option that allows you to use your gold jewellery or ornaments as collateral to avail funds. The loan is especially useful for meeting short-term financial needs, given their quick approval process. If you're considering applying for a gold loan, here’s a step-by-step guide to help you through the process. Read on!

Understanding How Gold Loans Work

A loan against gold involves you pledging your gold ornaments, coins, or bars as collateral to avail of funds based on their market value. The gold remains with the lender for the duration of your loan and is returned in the same condition once you fully repay the loan amount.

Features of a Gold Loan

• Gold loans are secured loans (money secured against your gold) and are often faster to process than unsecured loans.
• Approval for a Gold Loan depends on the gold’s purity, making it an ideal form of borrowing.
• The amount you get depends notably on the Loan-to-Value (LTV) ratio that’s determined by the Reserve Bank of India and decided by the lender.
• The Reserve Bank of India (RBI) has set the LTV ratio at 75%, meaning you can get up to 75% of the gold's value as a loan.

Wondering how to get Gold Loan approvals without a hassle? Ensure you have the right kind of gold! Lenders typically accept gold jewellery between 18 and 24 Karats; in some cases, gold coins (usually up to 50 grams) issued by banks may also be accepted.

Steps to Apply for a Gold Loan

Applying for a gold loan is a straightforward process. Here are the steps:

Step 1. Requirement & Repayment Capacity

Consider why you need the funds and how soon you can repay them. Gold Loan comes with competitive interest rates and shorter repayment periods, making them best suited for short- to medium-term needs. For example, if you’re planning a small home renovation or have a medical procedure coming up, borrowing against gold may be a sound option.

Step 2. Check Eligibility & Gather Documents 

Now for the main advantage of the Gold Loan process – the ease of application! Unlike many other loans, you don’t need a long list of papers to get a Gold Loan. In addition, most Indian citizens above 18 years are eligible regardless of occupation.

Typically, all you would need are two types of documents: proof of identity and a valid proof of address. There’s no requirement to submit income proof or salary slips, which is why gold loans are an easily accessible form of credit for many small business owners and self-employed individuals.

Step 3. Starting the Application Process 

Once your documents are ready, you can start the Gold Loan application process. There are two ways to go about this – either in person at your nearest branch or via the lender’s official website.

The first step is to assess your gold. At the branch, your gold items will be assessed on the spot for purity and weight using standard equipment and complete the documentation process. However, different lenders have different application process so read up in advance in case a trip to the branch is needed.

Then, your loan offer detailing the sanctioned amount, interest rate, repayment tenure, and terms will be presented based on the gold’s weight and purity.

Step 4. Loan Approval & Disbursal 

Your lender evaluates your gold and documents, once verified, the lender offers you the loan amount. Most NBFCs and banks transfer the amount directly to your bank account, while others may offer a cheque.

Your gold remains stored with the lender for the repayment tenure, while you receive your much-needed funds. Reputable lenders ensure the safety of your gold by storing it in high-security vaults and offering insurance for the pledged items. That being said, always ask about the safety measures before you finalise the transaction and choose a trusted lender. Finally, make sure to read the loan agreement closely before accepting the disbursement.

Step 5. Manage Your Loan Wisely

Once you receive the funds, it’s important to stay on top of your repayment schedule. Ensure timely payments help avoid late fees and preserve your CIBIL score. If you think you might miss a payment, don’t wait; let your lender know so you can then explore rescheduling options.

To Conclude

Applying for a Gold Loan is a straightforward and efficient way to access quick funds by using your gold assets as collateral. With minimal documentation requirements and a rapid approval process, gold loans are ideal for short-term financial needs.  The key factors you must consider include the purity of gold, the loan-to-value ratio, and ensuring you borrow responsibly based on your repayment capacity.

Experience a hassle-free Gold Loan with Poonawalla Fincorp—quick approvals, maximum loan value, and guaranteed safety for your gold. Get started now!

Frequently Asked Questions

1. What are the documents required for a Gold Loan from Poonawalla Fincorp?

Poonawalla Fincorp requires you to submit only KYC documents for loan procedure.

2. What happens if I default on my Gold Loan?

If you default on your Gold Loan, the lender has right to auction gold to recover the outstanding amount.

3. How is the loan amount determined?

The loan amount is based on the purity and weight of the gold being pledged. Lenders typically provide a percentage of the gold market value, known as the loan-to-value (LTV) ratio as a loan amount to you.