“Gold touches record highs” – a statement that we have grown so accustomed to over the years. At the beginning of 2021, it was in red hot form but has calmed in the last two months.
Indian citizens have immense respect for gold – it is omnipresent and has tremendous religious, social, cultural, historical, and economic value.
If we look into numbers, India is the second-largest consumer of gold. The managing director of the World Gold Council, while speaking to an Indian daily, said that Indian households have amassed up to 25,000 tonnes of gold.
Many people also consider it as a good option for investment and building up savings. They also use it during crunch times as collateral to raise immediate funding. Previously, a handful of entities offered a jewellery finance in the country, but the number has gone up significantly. The pandemic also led to a surge in demand for jewellery credits.
This article discusses jewellery credit eligibility and everything you need to know before applying for it.
How Does Gold Loan Work?
The borrower applies for a jewellery finance to the lender. The provider then evaluates his application and the pledged jewellery. Several factors must be considered, such as purity, weight, presence of stones, and others for deciding the credit to value (LTV).
After adjudging the LTV, the lender ascertains the credit limit. As per RBI norms, it cannot exceed 75% of the pledged ornaments’ market value. Given the security of collateral, the lender is happy to disburse the amount within a few hours.
Also, in most cases, the borrower enjoys the choice when it comes to repayments. He can opt for monthly instalments, bullet payments, or any other periodic outflow to suit his needs.
Jewellery credits are usually short-term in nature, but there is no limit on the number of times you can re-pledge the same ornaments. So on maturity, you can repay the outstanding and close the account, or you can extend the finance on jewellery by re-pledging them at the existing LTV.
Why are We Experiencing a Surge in Gold Loan Applications?
Even though not the most economical, a jewellery credit is one of the easiest ways to avail of quick funds. It is also comparatively risk-free for both parties and hence preferred. When the income dries up, and the working cycle takes a massive jolt, people look for alternate ways to influx some cash into the system.
Even though loan on jewellery demand takes a hit too in such circumstances, the pandemic made most lenders risk-averse, and they were more than happy in sanctioning jewellery loans. Even apart from regular households, small business owners and Kirana shop owners also resorted to jewellery finances to revamp their businesses.
Also, with banks and other lenders going the risk-averse way, personal finances became difficult to come by, thereby increasing the demand for jewellery loans.
Reasons for Preferring a Gold Loan
Here are the reasons jewellery credit has become a hot proposition in the market -
- Flexible repayment options
When you avail of a jewellery credit, you get the benefit of a flexible repayment schedule. You can choose to pay the interest upfront and the principal at the end, bullet payments, periodic EMIs, or go for an overdraft facility. It adds to the overall convenience and ensures a hassle-free process.
- Minimum documentation requirements
Since you are applying for a loan on jewellery, the lender ensures minimum documentation. The backing of collateral means that the finance provider knows he will not lose his money in any case. So the central harping point remains the valuation of pledged ornaments, and the rest barely takes some minutes to complete.
- Ability to re-pledge
There are no limits on how many times you apply for an ornaments finance based on the same piece of jewellery or other gold articles. It allows the borrower to delay the principal repayment repeatedly on the same asset. The lender would re-evaluate the LTV of the assets in his possession and assign you a mortgage value every time.
Cons of a Gold Loan
Here are the possible cons of taking a jewellery mortgage –
- Probability of losing valuable assets
There are times when individuals fall into an elongated cash crunch. If the borrower is unable to repay the amount, it can result in the lender liquidating the assets to recover the dues. Add to that the fact that most people do not merely buy jewellery for its value in money terms and have a sentimental attachment to them. So the borrower could end up losing much more than the mere monetary value of the finances.
- Lower LTV
In most cases, the LTV value of the finance depends on the lender. He can decide the amount based on the current market value of the pledged jewellery. It inadvertently results in the borrower getting a lower-than-full value of the assets.
- Missing timely repayment can impact the credit score
Even though there is no credit score requirement for the jewellery loan, missing out on timely repayments can affect it negatively. Most gold lenders are swift in forwarding such instances to the credit bureaus, and it can dent the chances of you getting any other type of credits.
Who is Eligible for a Gold Loan?
The credit against pledged jewels doesn’t depend on your credit score, i.e., a jewellery loan for low CIBIL score holders is also available. The lender looks into the following aspects for ascertaining your gold mortgage eligibility –
Your age must be between 18 and 75 years. Most lenders demand a co-borrower for applicants above 70 years.
- You must be an Indian citizen.
- Your age must be between 18 and 75 years. Most lenders demand a co-borrower for applicants above 70 years.
- The gold ornaments to be pledged must be of at least 18 carats. If you are looking to raise money against bank-minted coins, they must be of 24 carats.
Documents Required for Jewellery Loan Eligibility
Here are the documents that the borrower will have to furnish while applying for a jewellery finance with Shriram Finance –
- An identity proof – PAN card/ Passport / Driving License / Voter ID card
- An address proof – Passport / Driving License / Gas bill with Gas Book
- Other documents as required, along with recent passport size colour photographs of the borrower
Grab a Hassle-Free Gold Loan with Shriram Finance
A cash crunch can torment the best of us. Instead of pondering how to get over difficult times, a jewellery finance can be an efficient way to tackle a crisis. With gold rates going sky high, there is a chance of you securing a sizable credit conveniently. Add to that minimal documentation and a hassle-free process, and you should choose it any day over personal finances.
At Shriram Finance, we understand it can only be an emergency that pushes you to get a jewellery credit. So we undertake minimal documentation and disburse the mortgage within a few minutes of approval. We also ensure the highest security measures to keep your valuables safe.
Click here to get a gold finance with Shriram Finance today.