When you are in a cash crunch and unable to get money from both friends or family, then a loan is usually a good option. Although personal loans are still the most popular type of loans in India, gold loans are gaining popularity too. So, if you have a high-end and expensive stone jewelry, can you get a loan with it? Chances are- you can! However, you must first learn what a gold loan really is.
What is a gold loan?
A gold loan is a loan that you get against gold jewelry or gold coins. It can be obtained from a traditional bank as well as any of the several non-banking financial companies (NBFCs) in India.
Gold loans are popular for many reasons, one of which is the convenience. This is because these can be availed on the same day you apply for them, especially when you get them from an NBFC. In fact, the process itself is quite simple and easy. This is mainly because the risk is negligible from the lender’s perspective due to the gold collateral.
If you are applying for a gold loan at an NBFC then it’s possible that they may not even check your credit report. However, if you are applying for it at a bank, then they may consider your score.
Can I get a gold loan with a precious stone jewelry?
The following is the eligibility criteria for obtaining a loan with gold:
So, coming back to the million-dollar question here- can you get a loan on a precious stone jewelry? The answer is both “yes” and “no”.
Well, obviously, if you don’t meet the criteria above, then you can’t get a loan on the jewelry. Also, if the jewelry is a stone jewelry with little gold or no gold at all, then also you can’t get a loan.
It’s also worth noting that it doesn’t matter what kind of stones are encrusted in the jewelry, it’s the value of the gold that counts. So, it’s the only thing that’s solely considered for the loan amount and its approval.
If it’s the first time you are applying for a loan with gold, then be sure to keep the following things in mind:
Gold Value and Loan Amount
If your gold jewelry is worth Rs. 1 lakh, then it doesn’t mean that you can get a loan up to Rs. 1 lakh. In most cases, you can only get a loan up to 70% to 80% of the gold value. So, in this example, you can get a loan up to Rs. 70,000 to Rs. 80,000 only.
Gold loans are typically short-term loans, and you have to repay them in 1-2 years tops. This means that you should be able to comfortable with this structure or else you may damage your CIBIL report.
If you want a loan for a longer term, then you can try other options such as Loan Against Property or a personal loan.
History of Default
If you apply for a loan at a bank where you have defaulted in the past and there is an outstanding balance that you haven’t repaid yet, then it’s possible for them to freeze your gold even after you have repaid the loan. They may ask you to clear the previous debt first before they give your gold back.
Depending on where you get the gold loan from, you may get a high or low interest rate. For instance, public sector banks usually offer low interest rates than NBFCs, but then there are some NBFCs that are offering competitive rates. Interestingly enough, your local jewelry may also offer a gold loan at a ridiculously low rate, but you should go for this option only if you really trust them.
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