Unlocking the Value of Your Gold: A Guide to Gold Loans in India
Gold has always been a valuable asset in India due to its cultural, social, and economic significance. It is considered a lucky investment and is frequently passed down from generation to generation. In times of financial need, gold can be a valuable source of funds as well, and gold loans in India have become increasingly popular in recent years. We will look at gold loans in detail and discuss their benefits and drawbacks.
What is a gold loan?
A gold loan is collateralized by gold. In other words, you pledge your gold jewellery or ornaments as collateral for a loan. The loan amount is usually a percentage of the gold’s value, and the interest rate is usually lower than that of unsecured loans such as personal loans or credit cards. Gold loans in India are becoming increasingly popular in India because they provide individuals with a quick and easy way to obtain funds when they are needed. A gold loan allows you to borrow money against your gold without having to sell it. This blog will look at how gold loans can help people who need money or want to profit from the value of their gold.
Advantages of gold loans
- Loan Amount: A gold loan of at least Rs. 10,000 is available. However, this may differ in urban areas, where the minimum amount may begin at Rs. 25,000. A gold loan has no maximum gold loan per gram rate today limit with most lenders.
- Tenure: The minimum tenure on a gold loan can range between 3 and 6 months. A gold loan has a maximum tenure of four years. However, most lenders limit the maximum repayment period to two years.
- Interest Rate: The interest rate on a gold loan starts at around 7% and can go as high as 26%. However, when you pledge your gold to NBFCs and private lenders, the interest rates are still higher.
- Collateral: The gold is used as collateral. They will be kept by the lender until the loan is completely closed. If there are repeated defaults, the lender will auction the gold to recoup its losses.
- Prepayment: The borrower has the option to pay off the loan before the term expires. The majority of NBFCs do not charge a fee for preclosure. Banks, on the other hand, charge a percentage of the loan amount as a prepayment penalty. It could range from 1% to 3%. Because gold loans have a shorter term, most lenders do not require a minimum lock-in period. If there is one, it can last from one to six months.
- Processing Fees: In order to attract customers, some NBFCs waive processing fees. Most banks, however, charge a processing fee based on a percentage of the loan amount. It could range between 0.50% and 3%, with GST applied in addition to the processing fee.
Tax Advantages of Gold Loans:
The following tax advantages are associated with the use of a gold loan for specific purposes:
- Buying a house or making improvements to it: Tax benefits are available under Sections 24 (b) and 80C of the Income Tax Act, which allow for the exemption of the qualifying portion of interest expense and principal repayment, respectively, effectively lowering the overall cost of credit.
- Business interest cost: Interest expense on a gold loan used for business purposes can be claimed as a business expense when filing tax returns, effectively lowering your tax liability.
During times of financial need, a gold loan in India can be an excellent source of funds. They have lower interest rates, are easily accessible, and have flexible repayment options. However, if you are unable to repay the loan, you may lose your gold. It is critical to weigh the benefits and drawbacks of gold loans before taking one out, and to ensure that you can repay the loan within the time frame specified.
A gold loan is a cost-effective and convenient way to get cash when you need it, with quick access to funds, lower interest rates, no credit checks, flexible repayment options, and no end-use restrictions. However, before taking out a gold loan per gram rate today, you should weigh the benefits and drawbacks and ensure that you can repay the loan within the time frame specified.