A gold loan is a loan where the borrower gives a specified amount of gold in exchange for a loan amount (called loan-to-value or LTV) for a set length of time. This operates similarly to a traditional secured loan, with the gold serving as security or an asset.
How is EMI calculated for gold loans?
According to the Bank of Baroda website, “You can calculate the EMI due on your Gold Loan manually by applying a formula. The formula is as follows:
EMI Amount = [P x R x (1+R)^N]/[(1+R)^N-1], wherein P in principle, R is the rate of interest, and N is the number of instalments.”
Is credit score needed for gold loan?
In order to obtain a gold loan, a CIBIL score is not necessary. The only documentation needed to meet the qualifying requirements for a gold loan are the KYC requirements; no credit score or credit check of any kind is necessary.
Can the facility be availed by pledging gold coins?
According to the ICICI Bank website, “You can avail ICICI Bank Gold Loan against the security of 24 carat gold coins issued by banks only (operating in India) with 99.99% purity. The weight of the gold coin(s) cannot exceed 50 grams per customer as per RBI policy.”
Basic documents that I need to submit to avail gold loan
Documents needed to avail gold loan are –
1. Two passport-size photographs
2. Identity proof with a photo. (Any of the following: Driving Licence/Passport/Voters’ ID Card/Aadhaar Card/Ration Card)
3. Address proof (Any of the following: Driving Licence/Passport/Voters’ ID Card/Aadhaar Card/Ration Card/Job Card Issued by NREGA)
4. For direct agricultural activity, proof of land holding is required if the loan is above Rs 1 lakh.
5. For all allied agricultural activities, supporting documents are required if the loan is above Rs 5 lakh.
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