Gold loan assistance is offered by every bank, financial institution, including NBFCs, and FinTechs. Compared to other loans with some fixed terms or conditions for using that funds, gold loans offer more flexibility to the customer to use the funds any way they want, for example, weddings, education loans, or any unexpected medical emergencies.

There is no credit score requirement for the gold loan. The main criteria for getting a gold loan is your precious gold. Being a secured loan, your collateral security and its purity are more important in getting quick approval.

Benefits of applying for a gold loan:

• Quick processing.
• Minimal documentation required.
• The rate of interest charged is less as compared to other types of loans.
• Flexibility on end to the use of the funds.
• There are nil foreclosure charges. One is allowed to close a loan at any point in time.
• Easy repayment options without levying any additional interest charges.
• The best part about the gold loan is that here the loan amount is estimated based on the current market price of the gold, irrespective of the price of the gold at which you made a purchase.
• The financial institutions offer triple-layered security to the loan applicant’s gold loan ornaments that they kept as collateral. The banks or financial institutions have a separate vault to keep all the pledged gold jewellery of the applicants.

Know about the Gold loan eligibility criteria:

• Self-employed, salaried, businessman, professional, farmers, or traders can apply for a loan.
• The minimum age to apply for a loan is 18 years, and the maximum age to apply for a gold loan is 60 years.
• Should have a valid KYC document, like address proof and identity proof.
• It is the best financing option for all those willing to apply for a gold loan for a low CIBIL™ score.

Main factors that are important in getting a gold loan sanctioned:

• Self-employed, salaried, businessman, professional, farmers, or traders can apply for a loan.
• The gross weight of gold ornaments is measured using a gold scale.
• The net weight of the gold is calculated by reducing the stone available in gold.
• Loan to value as per the current market price of the gold.
• Gold loan purity.

Main documents required to apply for a Gold Loan:

To apply for a Gold loan, the most important documents required are:

Identity Proof

• PAN Card
• Aadhaar Card

Address Proof

• PAN Card
• Aadhaar Card
• Landline bills/Water Bills/ Electricity bills
• Latest Bank statements
• Passport
• Driving License
• Latest Bank statement/Bank Passbook
• Voter ID
• Rent agreement
• Gas Bond Paper with the latest receipt
• Latest Credit Card Statement

Problem statement

Many individuals are dealing with the issue of a low CIBIL™ score, or no credit score. When these individuals apply for a loan, it becomes difficult for the lender to access such borrowers’ credit-worthiness. It is a situation akin to eggs and chicken. At that time, availing of a gold loan is the best way to kick-start with a good credit or repayment history.

Role Credit score plays in Gold Loan

• Loans and CIBIL™ scores are associated with each other. The credit score is considered an important factor by the lender to analyse the credit-worthiness of anyone willing to apply for a loan. But the case of gold loans is a bit different. Firstly, it falls into the category of secured loans; the borrower here is required to lend their gold ornaments to the banks or financial institution from where they are looking to apply for a loan.
• CIBIL™ score can help you make big-ticket gold loans beyond the limit set by the banks or financial institutions. They are not the deciding factors in getting a gold loan approval, only a base for getting an extension of a huge credit facility. It is also known as a Gold loan for low CIBIL™ score.
• In fact, with the help of a Gold loan, a borrower gets a chance of  CIBIL™ repair.  Gold loan proves to be a better financing option when one has immediate need of funds, that too at a low-interest with easy EMI options and fast disbursal. It is available with minimal documentation and by pledging the gold ornaments.
• You can build good credit by paying all the EMIs and interest amounts duly and create a good repayment history.

Solving the problem

How to improve CIBIL™ score

A Credit score ranges between 300-900. Any score which is 700 or above is considered a good credit score. Your credit score helps the lender understand your repayment behaviour, past credit history, and how you are managing financial activities. If you make any kind of negligence in repaying the loan EMIs, it will affect your score.

If you want to build credit using a gold loan, it is necessary to know how you can build your score. When you take a loan against gold, all your EMI repayment data is submitted to the CIBIL™ at frequent intervals, so that they can update your credit score in your credit report.

Pay the EMIs regularly to repay the Gold Loan:

Like any other form of a loan, the gold loan is also given at a set interest rate and tenure. If you want to build credit, it is a must to pay regular EMIs. All the payments made towards the gold loan are informed to credit bureaus by the lender. Regularly paying the EMIs is a kind of positive financial development in the life of a borrower.

Go with a disciplined approach:

As a loan applicant, always apply for a gold loan with caution. They are undoubtedly the best way to boost a credit score with a low score or no score. But when you pledge your gold asset, you need to be sure that you are repaying all EMIs on time, as a gold loan is associated with a risk of losing your precious gold in case you fail to repay the loan in the stipulated period.

How are lenders estimating the gold loan amount eligibility?

The lenders always evaluate the gold loan purity, i.e., high carat gold and weight, before approving a loan application. It is the current market value of gold. Most of the lenders are offering up to 80% of the market value. It is also known as ‘ Loan to Value Ratio.

The Reserve bank of India has set the LTV up to 80% of the lender. For instance, if your gold loan value is INR 1 Lakh, the loan amount could sanction up to INR 80,000.

Bottom line

So, you can get a gold loan with low CIBIL™ score, and meet all the financial requirements with ease at the platform of Shriram Finance. All gold ornaments pledged should fall within the range of 18-22Carat gold. In case you are pledging 24-carat gold, only gold coins are accepted, that too issued by banks, and up to 50 grams only, per customer.

Making prompt payment of gold loan EMIs will show responsible behavioUr, and the same is reflected when the lenders access your credit report. By seeing your credit-worthiness, we, Shriram Finance may also offer you relaxation on offering interest rates in case you applied for a gold loan top-up.

In a nutshell, gold loans are one of the fastest emerging trends for getting a quick financial fix at the time of any of the financial contingencies and doing a CIBIL™ repair. Click here to get the best gold loan offers.