What is a Gold Loan for Education and How Does It Work?

A gold loan for education is a secured loan availed against gold jewellery to finance higher education needs. It offers a quick and convenient way to raise funds for expenses related to pursuing higher studies.

Here is how a gold loan for education works:

• Collateral: You pledge your gold jewellery as collateral with a gold loan provider like a bank or Non-banking Financial Company (NBFC). The quantity and purity of gold determine the maximum loan amount you can avail.
• LTV ratio: The loan provider will appraise your gold ornaments and calculate the market value, typically up to 75 % of this value. This becomes your loan amount.
• Loan Tenure: Gold loans typically offer tenures ranging from 12 months to 60 months or more, allowing you the flexibility in repayment. You need to pay interest on the loan monthly and the principal at the end of tenure. Some financial institutions may offer education loan-like options with a moratorium on principal.
• Interest Rates: Interest rates are generally between 9% and 15% p.a., depending on the loan provider, loan amount, tenure, and repayment structure. Some lenders may offer competitive rates specifically for educational purposes.
• Documentation Requirements: Minimal documentation is required making it quicker to avail compared to education loans. The gold ornament itself acts as collateral.
• Risks Involved: On repaying the loan, you can get your gold jewellery back from the loan provider. However, defaulting can lead to penalties or auctioning of pledged gold.

The loan amount can be used to pay college fees, hostel expenses, study materials, and laptops, among other requirements.