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Should one Take a Gold Loan in India? What is the Eligibility to Avail it?

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One has surely faced a situation where funds are needed in an emergency and there is a shortfall of cash. It is in such a situation that one remembers the family gold ornaments. This is not a situation anyone would want to be in but desperate needs call for desperate measures. There have been cases when many successful businessmen especially in the construction business have had to mortgage the family gold in order to tide over an emergency .In rural households gold jewellery is available sometimes in plenty but there is a paucity of cash. The gold loan is a popular route for raising cash particularly for medical and other emergencies. Availing a gold loan is no longer taboo and is gaining popularity in middle income families.

What is a gold loan?

A gold loan is basically a loan obtained from a bank or a non banking finance Company. One has to pledge gold jewellery or gold coins in case of banks. In the case of a non banking finance Company only gold jewellery can be pledged. The gold needs to have a purity of 18-24 carats. Loans are sanctioned after the proper scrutiny of the documents and the quality of the gold. The loan amounts are dispersed in the form of cash, demand drafts or an account transfer.

These loans are also called emergency loans as they can be procured in a hurry and are very convenient. They are popularly marketed as 5 minute loans. These loans are more popular than personal loans as they are secured in nature. Non banking finance Companies follow a liberal procedure when it comes to sanctioning these loans as they are secured against gold jewellery. One can literally walk in with gold jewellery and walk out with a gold loan from a non banking finance Company in a matter of hours. On repayment of the borrowed amounts the gold jewellery is returned.

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