Lending money in exchange for gold (usually with a carat weight of 18-24) is known as a gold loan. It is a kind of secured loan. Depending on the present market value and quality of gold, the gold loan eligibility amount is normally up to 75% of the gold’s worth.
The criteria for the gold loan depend upon the quality of the gold and the amount of the loan including the tenor. Many small details which are necessary for the gold loan are the annual income of the applicant, the rate of the gold on that particular day, and the age of the applicant. Improving the gold loan eligibility depends upon the credit score of the applicant with the interest rate which may vary from bank to bank. The calculation about the tenor of a loan and maintaining a healthy credit score with long-term EMIs mends the eligibility of the gold loan.
Gold Loan Eligibility Criteria
The best part about a gold loan is that anybody who has gold coins or jewellery may apply for a jewellery loan. For a jewellery credit, you do not need to provide any evidence of your income, such as a pay stub or bank statement. Gold loan eligibility requirements might differ from bank to bank, but here are some general rules on who can qualify for a jewellery loan from any financial institution.
- Age of the applicant: If you’re an Indian citizen above 18, you may qualify for a jewellery mortgage. If you’re above the age of 70, some banks demand you to have a co-borrower.
- The applicant’s profession: Jewellery loans are available to salaried workers, entrepreneurs, and self-employed professionals at most Indian banks. Farmers and dealers are also included in this grouping.
- Accepted quality of gold: You may deposit gold in any form, including jewellery, minted coins, and decorations, to be eligible for a jewellery mortgage. Minimum 18-karat gold purity is required, with a maximum of 22 or 24 carat gold purity permitted. Only 24-carat gold coins with a maximum weight of 50 grams can be minted.
The deposited gold’s weight and current market value are the primary determinants of the accepted loan amount.
Documents Required For a Gold Loan
In addition to meeting the jewellery credit eligibility requirements, you must provide copies of the following KYC documents to the lending bank (in addition to the applicant’s Aadhar card).
- Identification proof (any one document): Driving license, PAN card, passport, or Voter ID card
- Address proof (any one document): Driving license, rent agreement, passport, or utility bills like your electricity or gas bills
- Additional items: Two recent, passport-sized photographs of the applicant
When asking for a loan on gold of more than 25 lakhs, certain banks may demand you to submit your income tax returns (or ITRs) from the past three years. If your yearly income is more than Rs. 5 lakhs, you must additionally provide your PAN card.
Some banks may additionally want documentation of your income before providing highest gold loan:
- Salary slips (for the previous three months)
- Bank statements (for the last three months)
- Form-16 for the last financial year
Tips for Improving Your Gold Loan Eligibility
Before applying for a personal loan, consider the following suggestions. For the most part, they will help you receive more credit at a cheaper gold loan interest rate.
Maintain a Healthy Credit Score
Banking and lending organizations routinely report their customers’ borrowing behaviours to the credit bureau, creating a credit score based on the information provided.
Therefore, a good credit score has become an essential prerequisite when asking for any loan since the lending party can access it.
An excellent way to boost your chances of obtaining the highest gold loan is to have a perfect credit score of at least 700. You may raise your credit score by making on-time payments on time, using no more than 30% of the available credit limit on each card, and not closing any old accounts you no longer need.
- Choose a long-term tenor
Borrowers may choose between shorter terms (1-3 years) and lengthier (3-5 years) personal loans. The longer term is always the best option when applying.
Applying for a longer term spreads out your monthly payments across a smaller area. The monthly debt-to-income ratio is less affected, and the payment load is lessened.
- Avoid applying for multiple loans at a time.
If a person has applied for a loan recently, regardless of whether it was accepted or not, the credit bureau will look at the information. You may not be able to get a loan on gold since your credit rating has been negatively impacted.
Only apply for schools that meet your qualifications, rather than wasting time applying to schools that don’t fit your needs.
Because your gold backs gold loans, you should be cautious about repayment and only take out a loan amount that you can afford to repay. It may harm your credit score and report, as well as the termination of any future loan application.