In our country, people love to wear gold ornaments, and as we all know very well, India is one of the top countries that buy gold. Here, I am talking about gold loans and overdraft facilities on gold.
First of all, I want to say to all my users that kindly do not take any kind of loan if you are not earning handsomely and are not able to repay the loan amount in the future. It’s my personal view, so kindly do not take it personally.
Here, I come to the topic that if someone is in need of urgent money and he/she cannot arrange the funds from Personal Loan, friends, colleagues, or family, then there is a good option for a gold loan. Here, I am talking about a gold loan and overdraft on your gold.
What is a Gold Loan & How Does It Work?
I hope that all of you know about gold loans, but I will explain for those who don’t have any idea about them. A gold loan comes under a secured loan where you give your gold to the lender/banks and receive money against it. In a nutshell, you deposit your gold with the bank and get approximately 70% of the value of your gold. In some cases, a few banks provide up to 80% of the gold value to farmers for agriculture; this is called an agriculture gold loan.
For example: If the value of your gold ornament is Rs. 100, then most banks/NBFCs/Muthoot will provide you Rs. 70. Taking the same example for an agriculture gold loan, they will provide you Rs. 80.
Let us understand this process in detail. Here, you will receive an amount that is approximately 70% of the value of your gold and pay it back through EMIs with some rate of interest (which may vary according to the bank).
What is a Gold Overdraft Facility & How Does It Work?
As you now understand gold loans, here I am talking about overdraft on gold. As you read “overdraft (OD),” I hope most of you understand the term. Here, when you give your gold to the bank, they will issue an overdraft facility. This means that by evaluating the value of your gold, they will approve the same amount (70%), as I mentioned above. But here you have the choice to withdraw only the amount you need, and the rate of interest is charged only on the amount you use.
For example: If the bank approves Rs. 100 against your gold, then Rs. 100 is the overdraft limit on your gold. If you use Rs. 30, then interest will be charged on Rs. 30, not on Rs. 100. And here, you are not obliged to take the full amount as a loan; you withdraw the amount according to your need.
Benefits of Overdraft Gold Loan Facility:
- You can arrange funds without selling your gold or gold ornaments.
- The overdraft facility gives you flexibility to repay the loan.
- Quickly arrange funds with minimum documentation.
- Arrange funds against gold at a competitive interest rate.
- A person with a low CIBIL score can also get funds because it is a secured loan against gold.
- It is very helpful in case of emergency fund requirements.
Disclaimer: This views and above written content are only for informational purpose. We advise users to check with certified experts/ Banks and prepare a valid documents before taking any Gold Loan. We are not responsible for any loss.