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Gold Loan: All You Need To Know

July 02, 2021 | posted in News | posted by : Manappuram Finance
Gold loan has been the savior for many at critical junctures. People can make use of the gold ornaments, bars, or coins held at homes or bank lockers and get money without any hassles. Manappuram has been serving customers pan India with gold loan schemes that can be acquired at lower interest rates.
Get in touch with us to apply for a gold loan online.
What is Gold Loan?

Gold loan is a secured loan wherein the borrower would be mortgaging gold property, let it be jewelry, coin, or bar, at the NBFC or bank and receive cash in lieu. The money approved would be corresponding to the gold pledged at the NBFC. The amount can vary depending on the finance firm you approach, as different NBFC/ bank/vendors put different values for the gold.
On the other hand, the gold loan amount will not consider the value of the gold asset at the time of purchase. Instead, the current gold rate would be the yardstick for the gold loan amount approved. Neither the financial status of the individual would be sought.
Features of Gold Loan
The gold loan has several features that distinguish it from other loans. In fact, the beneficial features offered by gold loans make it the most useful loan.
Quick Approval – Instant loan approval is the main feature of a gold loan. Borrowers don’t have to wait expecting approval from the higher-ups in the bank or NBFC in the case of a gold loan. It would be approved and money handed over after confirming the identification details of the individual, examining the application, and analyzing the purity of the gold.
Easy or No Documentation – You cannot say that there is no documentation for gold loan at all. Individuals applying for a gold loan have to fill an application, attach the ID and address proof, and submit. That’s it. The lender would verify the details and notify the borrower of the amount receivable for the particular quantity of gold. Once the client agrees to the same, the money would be issued without any further delays.
Secured Loan – Imagine the complexities involved when you approach a bank or NBFC for a personal loan or business loan. The main factor that would decide the eligibility of an individual is a credit score or CIBIL score. The lender would scrutinize the credit history to ascertain whether the individual is trustworthy or not. Although the past conditions cannot determine one’s present status, the finance firms will consider credit score as the benchmark. A gold loan is a secured loan, in which you would be pledging gold. Hence, the lender need not check the credit history or CIBIL score of the borrower. This feature of the gold loan helps an individual to approach firms without any concern.
Gold Loan for Any Purpose – Gold loan lenders will not ask the purpose of the finance. Most of the other loans need the individual to furnish the requirements. Moreover, those loans would be admissible for specific purposes only. A gold loan can be obtained for buying vehicles, renovating home, children’s schooling, finance needs for marriage, and so on.
Repayment Options – A vital feature of a gold loan is that the borrower can choose how to repay it. In the case of most of the other loans, the lender would decide the repayment process and EMIs. That is not the case here. NBFCs like ours, Manappuram Finance, offer four types of repayment options. The customer can choose the methodology and simply go ahead with it. This feature of gold loans helps individuals to plan the family budget accordingly. Furthermore, we have set up an online repayment feature as well.
Procedure to Avail Gold Loan
One can pursue the procedure for availing of the gold loan without any confusion. A straightforward process doesn’t require any in-depth knowledge. The debtor has to carry the gold to be mortgaged and identity/ address proof.
Documents required for a gold loan are:
·         Identity Proof –Aadhaar card, voter’s ID, driving license, PAN card, or ration card could be used as the identity proof.
·         Address Proof – Electricity bill, telephone bill, ration card, rental agreement, attested bank passbook, or property document could be used as address proof.
The procedure for a gold loan is:
·         Reach the NDFC or bank
·         Fill-in the application form
·         Submit filled application along with the identity and address proof
·         The financier will peruse the documents and evaluate the value of the gold. S/he will confirm the money that can is authorized for the gold you are pledging
·         Based on the agreement from your end, the lender will complete the other formalities including finalizing the gold loan term and pass the money.
Types of Loan and Applicable Interest
Individuals can opt from a plethora of loan options. Each of the loan processing procedures would be different. In addition, some of the loans are approved only for stipulated purposes.
Gold Loan – Gold loan is a secured loan that could be sought irrespective of the type of requirement. We offer gold loans at remarkably low-interest rates.  Further, the value for gold is significantly higher than banks and other NBFCs.
Personal Loan – Personal loan is another loan option available. The personal loan interest rates are high compared to a gold loan. The loan approval procedure is also daunting. The finance firms would check the individual’s credit score and credit history before approving the loan. There are fewer chances if the CIBIL score is medium to poor. The personal loan interest rate varies from 14% to 24%.
Property Loan – Borrowers can mortgage property and obtain loans against them. This is normally considered for obtaining a higher amount. The loan interest rate for property loans may go up to 12%.
There are loans for specific purposes like a car loan, home loan, and education loan etcetera also available.
Pros of Gold Loan
Pros of the gold loan include the following. The advantages offered are the reason for the rising number of borrowers applying for gold loans across India.
·         Quick processing and issue of money
·         Minimal documentation
·         Easy repayment options
·         Facility for online gold loan application (Only at reliable NBFCs like Manappuram)
·         Credit score/ CIBIL score is not required
·         Nil processing fee
·         Income of the borrower is not examined
·         It can be for any purpose
·         Lower interest rate than loans like a personal loan and business loan
Cons of Gold Loan

The gold loan has a couple of drawbacks as well though it does not reduce the appeal of a gold loan.
Loan to Value (LTV) – The Loan to Value ratio of gold loan is comparatively low. The value decided would depend on the financing firms. Nonetheless, the Reserve Bank of India has stipulations for controlling the LTV. We are happy to state that Manappuram offers the best value for the gold pledged.
Loan Amount is directly related to the value of Gold pledged– Fluctuations across the world market directly affect gold prices. Consequently, the gold prices are varying in nature. The loan amount approved will not only depend on the purity of gold but also the gold price prevailing on that day.
You may Lose your prized Gold Ornaments – We Indians have an emotional attachment towards gold. Many receive gold from their ancestors, making it a priced asset. More than the value of the gold ornament, the emotional value attached to it is a prime factor. Failure to repay the loan after the notice period can lead to loss of the gold assets. The finance firms are authorized to auction the gold in that case.
Impact of Gold Price Fluctuation
Gold price fluctuation can directly influence the gold loan rates. You may check the status of gold prices while applying for a gold loan. Nonetheless, the gold once pledged will remain with the lender until you retrieve it after complete payment. The gold price will not affect the gold already mortgaged.
The effect of gold price fluctuation on gold loans are:
LTV may get impacted – Loan to value ratio is determined based on the constant gold price. A frequent fluctuation of the gold prices will lead to frequently changing LTV. The creditors may decide to play safe and fix the value at a low rate. Therefore, the borrowers will be getting a comparatively low price during such times.
A High Price When You are Applying – As we have said initially, the gold price whilst purchase will not be considered while approving the gold loan. The current gold price will be used for deciding the value of the asset. The purity of the gold is the only thing that matters. The gold would be checked for purity and the value would be determined. Hence, even if you bought at a low price, you can get a high value.
Gold Price is Low When You are Applying – Even if you have purchased the gold when the price was high, if you pledge gold when the price is low, you will get a loan based on the lower price only.
Common Mistakes Made at The Time Of Applying For Gold Loan
Borrowers do make some common mistakes whilst applying for a gold loan. They may not realize the mistake until the time of repayment. In turn, the debtors would be paying the exorbitant amounts as interest, in addition to other complexities. Let’s see some of the common mistakes done by lenders at the time of applying for gold loans.
Purity of the Gold Ornament – The purity of the gold is the only thing that affects the gold loan amount approved. This point may be borne in mind whilst purchasing gold ornament as well. People purchase jewelry studded with gems and precious stones. You may note that only the weight of gold would be used for the purpose of a gold loan. The weightage of stones, however precious those maybe, would be deducted. Be aware of this fact before you approach a creditor for a loan.
Reliability of the NBFC/ Bank/ Vendor – You will be receiving a value determined against the gold you are pledging. The gold rates are going up day by day. Even if not so, the money you get would be less than the cost of the asset. This means that the lender can acquire a good profit whenever it is sold. You must make sure that the firm is trustworthy and they would be fully transparent in their dealings. They should not indulge in malpractices such as selling your gold without your approval, or replace it with low-quality gold.
LTV Calculation – The Loan to Value (LTV) ratio would be different at different finance firms. You may confirm the LTV when applying for the gold loan. Financiers like Manappuram are known for higher LTV (depending on the scheme selected), which ensures that the borrower is receiving a high value for their gold asset.
Comparison of Different Financers – The ease of obtaining a gold loan, LTV ratio, repayment options, and other criteria will exclusively depend on the lender. One must compare the NBFCs or banks offering gold loans in advance. Apply for a gold loan only at the right financier. It would make not only the loan process convenient but also would help in a stress-free repayment.
Manappuram Finance – The Most Suitable Firm for Gold Loans
Manappuram has always been customer-centric in nature. We have been facilitating gold loans at the best interest rate without any complex documentation process. Furthermore, we have 13 gold loan schemes for you to choose from. The customer can choose the scheme that suits him or her ideally.
Many gold loan repayment options are also available. Select the repayment option that is viable for you and opt for the same. We are here to support our customers with the best financial support without burdening them. That’s how we have won hearts and strengthened our credibility.
Reach out to us to know more about the gold loan and obtain one.

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