More and more Indians are realising the value of their gold jewellery and using it to get instant funds when they need it. Gold jewellery is a valuable asset that can be easily turned into money during emergencies.
When you opt for a gold loan, you will find it to be a better alternative to other complicated financial schemes. Features like lowest gold loan interest rates, minimal paperwork due to the gold serving as collateral, and quick disbursal make gold loans a convenient option for your financial needs.
The value of gold loans is closely linked to the market price of gold. When you apply for a gold loan, the loan amount depends on factors such as the weight, purity of your gold, and the current market rate. Fluctuations in the market price directly impact the baseline value of the gold loan.
Therefore, when you are considering a gold loan, it is essential to understand how the evaluation process works and how changes in the price of gold can affect your loan amount. For example, when the price of gold goes up, the value of the gold you pledge as collateral also increases. This means you may be eligible for a higher loan amount or a more favourable interest rate.
Let us take a closer look at the factors that determine your gold loan amount:
1. Gold's purity and weight
The primary factor in gold loan evaluation is the purity and weight of the gold you pledge. The purity is assessed based on the karat value of the gold, such as 18 karat. Higher purity gold usually fetches a higher loan amount. The weight of the gold in grams also plays a crucial role in determining the loan value. Lenders generally offer loans up to a percentage of the gold's value, typically going up to 75% as per Reserve Bank of India (RBI) guidelines.
2. Market value of gold
The current market value of gold is another critical factor in evaluating a gold loan. Gold prices fluctuate daily based on global market trends, and lenders assess the current price while determining the loan amount. As gold prices rise, the loan amount you can secure against your gold also increases. It is important to note that lenders consider the value of the gold at the time of evaluation, not the purchase price or sentimental value.
3. Market value of gold
Loan-to-value ratio is the percentage of the gold's value that lenders are willing to lend as a loan. As mentioned earlier, it typically goes up to 75% of the market value of your gold. For example, if your gold is valued at Rs. 1,00,000 and the lender offers an LTV ratio of 75%, you can expect a loan amount of Rs. 75,000. Lenders set the LTV ratio based on various factors, including risk assessment and regulatory guidelines.
4. Documentation and verification
While gold loans are known for their minimal documentation, lenders still require some basic paperwork and verification. This typically includes proof of identity, address, and ownership of the gold. Basic KYC documents like Aadhaar Card, PAN card, voter ID, and passport are commonly accepted. Proper documentation ensures a smooth evaluation process and helps establish the authenticity of the gold and the borrower.
It is worth mentioning that credit history or income proof is not considered during gold loan evaluation. Unlike other types of loans, gold loans are secured by the collateral of gold, eliminating the need for such assessments. This makes gold loans accessible to individuals with varying credit profiles and income levels.
Gold loan evaluation is a process that involves assessing the purity, weight, and market value of the gold you pledge. By understanding these factors, you can have a clearer idea of the loan amount you can expect. Remember to choose a reputable lender, compare loan terms, and evaluate the overall cost of the loan before making a decision. A gold loan can be a valuable financial tool when used wisely, offering quick access to funds while leveraging the value of your gold assets.
Apply now and efficiently handle your expenses with an instant gold loan offered by Bajaj Finance.
