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A loan against gold or gold loan has been the most-opted finance option. The past couple of years registered a quantum leap in the increase in the number of gold loans in the country. Believably due to the financial crisis, the citizens were subjected to owing to the pandemic situation.
The low interest of gold loans has been the predominant factor that led to the widespread popularity of gold loans. Unlike other types of personal loans, the interest of the gold loan is quite low. Nonetheless, you must bear a few factors in mind while you purchase gold. It would help you get a better amount when obtaining a gold loan, as well as, during resale.
Per gram gold loan would depend on the purity and quality of the gold ornament. As you understand, a loan against gold is a secured type of loan. The lender would be auctioning the gold in case the borrower fails to repay the gold loan. Per gram gold loan would be higher if the gold you pledge is good quality BIS Hallmarked one.
On the other hand, per gram gold loan value would go down significantly in the case of gold that lacks quality and purity. Gold loan per gram would be directly proportional to the Karat rating and the quality of the gold being mortgaged. Many financiers do approve gold loans if the gold is not pure. Whereas, the subject characteristics may not affect the interest of gold loan when you approach a trustworthy financer. A loan against gold is the top finance option in India nowadays.
Things You Must Check While Purchasing Gold
You must confirm that the gold you purchase is of standard quality and the requisite markings are there that affirm the same. This would be instrumental in getting more value per gram on gold loan and easy approval of loan against gold. Selling gold during urgent financial needs may not be an advisable option. A gold loan would make sure that you get the required money without losing your gold asset.
Even if you decide to sell out the gold ornament, only good quality gold would fetch you the right value per gram on gold. That means the quality of gold is vital for loans against gold and reselling.
1. BIS Hallmarking on the Gold Ornament
BIS hallmarking is an optional quality assurance methodology followed in India. It is observed to be the only authorized agency by the Government of India, for testing and marking the quality seal (BIS Hallmark). The gold with BIS hallmarking would get you more money per gram on gold loan than the gold ornament without the subject marking. A voluntary option, leading jewellers in Kerala/ India confirms with the BIS quality standard and use the marking as a marketing tool. A loan against gold would be easy with the BIS hallmarked gold. As we have stated in the preceding paragraphs, the interest of gold loans would not vary based on the markings.
2. Karat and Fineness
22 karat or 91.6 (the percentage of gold) are the standard purity ratings of the gold ornaments. A karat rating of 24 karats is considered pure gold. However, it cannot be used for manufacturing jewellery. An ornament bought from a reputed and reliable jeweller will have 22 k marking, fineness number, and BIS markings on it. Such conformity will assure you the best value per gram on gold loan. A loan against gold would also be easy with a 22-karat gold with a fineness rating. 18 k gold is not accepted by most of the NBFCs and banks. Further, the gold loan process may not be easy, even though the interest of gold loans may not vary.
3. Jeweller’s Reputation
The jewellery, especially the renowned ones, would put their hallmarking logo or abbreviation on the gold ornament. This would help in identifying the jeweller. The financer can recognize the quality of the gold without any inspections. The loan against gold may become easy in that way. As the gold loan solely depends on the pledged gold the financer would need to ascertain the quality and purity thoroughly. To decide the approved value per gram on a gold loan.
How to Select the Financer for a Gold loan?
NBFCs, banks, and individuals offer loans against gold. A gold loan from individual lenders is the least preferred option among all. The high interest of the gold loan is the crucial factor that deters borrowers from individual financers. Moreover, they would offer less value per gram on gold loan.
NBFCs and banks would be abiding by the directives from the Reserve Bank of India in the case of value per gram on gold loans. RBI, the financial regulatory body in India, modifies the terms and conditions depending on the market, economic factors, and other relevant elements. The interest of gold loans has reduced over a period, predominantly due to the tight competition among the financers.
Reputed and trusted entities like Manappuram Finance offer gold loan at reduced interest rates. They have the lowest interest of gold loan in India. Competing financers are also not far behind in offering a low-interest rate of gold loans and good value per gram on gold loans.
You must analyse and ascertain the NBFC or bank prior to approaching it for a gold loan. The features you must check include the interest of the gold loan, the value per gram on gold loan, and the procedure for loan against gold.
Trusted Financer Only – Undertake a thorough check about the lender before reaching out to them for a gold loan. They should offer the best value per gram on gold, and low interest on gold loans. Clarify everything including processing fee during the discussion with the executive on loan against gold. Some financiers charge processing fees based on the gold loan amount. Some others charge a stipulated minimal amount, irrespective of the requested loan against gold.
LTV – How much the bank or NBFC will give per gram on a gold loan? Earlier the value was up to 75%. The latest directive from the RBI indicates a raise in the Loan to Value (LTV) ratio to 90%. Genuine and customer-oriented financers or lenders will give a maximum value of 90% per gram on gold loan. Note that, the value per gram on gold loan would also depend on the purity of the gold. Therefore, you must be sure about the quality and purity of the gold ornament.
Easy Processing – Gold loans attained much popularity principally due to the easy processing. A loan against gold doesn’t ask for a complex procedure like other types of loan, besides offering good value per gram on gold loan. The interest of the gold loan is also very low compared to personal and business loans. Even though these are the basic facts, the gold loan process would differ among financers. Choose the one that offers quick processing with a low i
interest of gold loan.
Online Gold loan – Leading NBFCs like Manappuram Finance have introduced online gold loan facility for providing instant loan against gold. In addition to giving great value per gram on gold loan, the interest of gold loan is very low at such firms. Registering for an online gold loan would be good if you have recurrent requirements of funds for business or personal requirements.
Our Observation
Gold has been recording constant growth for several decades. Assess the quality and purity of gold before you buy. It would be important to fetch you a good price on reselling and obtain a good value per gram on gold loan.
Are you looking for a loan against gold?
We suggest you check all the details about the loan against gold including interest of gold loan and value per gram on gold loan before selecting the lender.