What Is A Gold Loan?

A gold loan is among banks’ profitable loans as banks are free from the worry of non-performing assets (NPAs). This is because the jewelry that is taken as collateral remains with the bank even if the borrower defaults on the payment of their monthly installments on their loan.

Episode Transcript

(00:00):
Africa Business Radio to it a ProfitableAfrica Lobedia. You probably must have come
across the term gold loan as atype of loan and wondered exactly what that
even means when a gold loan,as the name implies, is a secured

(00:24):
loan, whereas the borrower keeps theirgold ranging from eighteen thousand to twenty four
thousand with a bank or a financialinstitute as a security and aveals capital against
it Nobedia uncoperative terms. A goldloan can be understood as a similar concept
to a mortgage loan, in whichthe owner keeps their house or property as

(00:45):
mortgage with a bank and takes aloan against it to fulfill their needs for
capital. Welcome to another episode ofLoanclopedia. This is where we talk about
anything and everything. Loan. Myname is Anja, Your hostser a gold
loan amongst banks. Profitable loans asbanks are free from the worry of non

(01:07):
performing assets. This is because thejury, which is taken as a collateral,
remains with a bank even if theborrower depends on the payment of their
monthly installments on their loan. Well. The way it works is that it
helps you check the quality. Whena customer approaches the financial institute for a
gold loan and the first step theinstitution takes is to check the purity of

(01:29):
the gold shreury that is being consideredas collateral. Along with the termination of
value of the jury. It alsohelps you to know your customer, know
your customer. Norms and checks arestated by the Reverse Bank of India are
performed by the bank where the bankgets to know their customers details such as
identity, credit history, the necessityfor applying for a loan and other details

(01:53):
crucial in granting the loan. Alsoapproval of gold loan. That is what
it helps you do. Once thequality and value of Juary is determined and
the KYC procedure is complete, theloan terms are agreed upon by both the
financial institution and the customer of anagreement, the loan is approved and the

(02:14):
amount is then credited to the borrower'saccount. These entire process can be completed
within a couple of hours. Theinterest rate on gold loans vary based on
the purity of gold. The higherthe purity of gold, the higher the
amount that can be available. Interestrates vary from eight percent per annum to

(02:35):
eighteen percent per annum in the publicsector, whereas in the private sector these
rates are as high as twenty fourpercent per annum. A gold loan is
generally a short to medium term loanwhere the tenor ranges from six months to
twenty four months. Thus, itis not a long term loan instrument,
as the juary will be deposited withthe bank as collateral against the loan.

(02:58):
The bank is confident of sanctioning alanto the person even with a low credit
score. Even though pressure stones havehigher value, they are not considered at
the time of calculation. For agold loan. Only the value of gold
is taken into consideration for the calculation. Thus, many at times a digital
gold product is preferred against a regularproduct for the purpose of Pledgingedia. Now

(03:24):
gold loan works as a common workingcapital loan as business for feeling the short
term requirement for funds. In suchscenarios, a gold loan is preferred against
the personal loan with a vast interestrate on a cooperative basis. On that
note, we've come to the endof today's episode of Longclopedia. My name is Anaja